State-owned banks have surpassed their private-sector counterparts, recording the highest gains in market capitalisation in Q4 FY24, driven by improved financial performance. According to S&P Market Intelligence, the government’s emphasis on long-term projects has significantly favored state-owned banks.

Out of the 20 largest banks in India, 15 have seen an increase in market capitalisation, with 13 of them experiencing double-digit growth. The market capitalisation of all PSU banks among the top 20 has shown improvement compared to the previous quarter.

India is projected to achieve a 7.6 per cent economic growth in FY24, up from 7.0 per cent in FY23, making it one of the fastest-growing major economies. With substantial investments in infrastructure development such as highways and airports, state-owned banks are expected to benefit more than private lenders due to their higher exposure to these sectors.

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Top Gainers in Market Capitalisation

Indian Overseas Bank led the country’s largest banks with a sequential increase of 38.5 per cent in market capitalisation, reaching ₹1.13-lakh crore as of March 2024. Punjab & Sind Bank and Bank of Maharashtra secured second and third positions, registering gains of 38.4 per cent and 38.1 per cent, respectively.

On the contrary, only ICICI Bank and Yes Bank witnessed growth among private banks, showing single-digit increases in market capitalisation. Among the banks that saw a decline, all were from the private sector, including HDFC Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank, and IDFC First Bank, according to S&P data.

Analyzing Bank Performance

Investor confidence in Indian banks, especially PSU banks, has notably strengthened in recent years due to robust credit growth in a rapidly expanding economy. While the Nifty PSU Bank Index surged by more than 22 per cent in Q1, the Nifty Private Bank Index declined by over 5 per cent during the same period.

HDFC Bank, representing about 26 per cent of the private bank index, dragged down the index with a 15.2 per cent decline in market capitalisation to nearly ₹11-lakh crore. Nevertheless, HDFC Bank maintained its top position, followed by ICICI Bank and State Bank of India in the second and third spots, respectively.

Investor Sentiment Trends

Market capitalisation gains in Q4 underline the growing confidence in PSU banks, supported by their strong performance and government initiatives towards infrastructure development. The recent trends show a shift in sentiment favoring state-owned banks over their private counterparts due to their strategic positioning in key sectors.

Published on April 10, 2024