While the Sensex & Nifty indices have run-up 40-50% over the past year, and sectors such as capital goods have hit 60% returns, this hasn’t been true for the banking sector, as a whole. Below is a chart of the top-4 banks, which together account for over 75% of the BSE Bankex sector index, over a 1-year period. Except for ICICI, all other banks have trailed the Nifty-50 market index.
Zooming into the past 3 months, we see a similar situation, except that HDFC Bank has shown some strength, while the State Bank of India turned into a laggard.
Why this weakness in performance, while the Indian economy has boomed, with record growth in consumer spending, home loans and such? It could be a combination of factors such as competition from international banks, stabilization of interest rates (combined with a flattish yield curve), slowdown in liberalisation & reforms, concerns over non-performing assets (NPAs), etc.
I’ll use the “Live Charts” page to monitor relative strength of these scrips - let’s see if the ‘06 budget brings a change of trend for this sector.
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