On the day of the Union Budget, the Bombay Stock Exchange (BSE) Sensex set a new record of 5% growth in one day, breaking a record of 22 years. Also, the National Stock Exchange (NSE) Nifty also saw a jump of about 5%. Simultaneously Nifty Bank also reached a record high and this boom is still going on. Since the presentation of the budget, Nifty Bank has seen a jump of over 10%. Today at 3.15 pm, Nifty Bank was trading at 34,235.30 points with a gain of 3.47% i.e. 1143 points.
This rally has been witnessed in the banking sector due to the growth-oriented budget with the announcement of the formation of Bad Bank by the Finance Minister in the General Budget, privatization of 2 state-run banks. In just 2 days after the budget, Nifty Bank has grown by more than 10% and this increase is still going on. The banks that have benefited the most from this rally include banks like ICICI Bank, HDFC Bank, Kotak Mahindra Bank, SBI and IndusInd. Nifty Bank reached a record high of 34,652.50 in intraday today. However, investors have also booked profits to take advantage of this rally.
New players will get a chance to kill entry in the banking sector
Experts say that after this growth-oriented budget, the trend of investors is most towards the stocks of the finance sector. Vijay Kuppa, the co-founder of Orowealth, told Moneycontrol that the formation of a stressed asset fund and the privatization of 2 PSU banks are very positive news for the banking ecosystem. He said that with the privatization of PSU banks, new players will get an opportunity to enter the banking sector and this will improve the lending practice.
These bank stocks jumped by 30% in 2021
So far in the year 2021, stocks of ICICI Bank, SBI, Axis Bank, Federal Bank and IDFC First Bank have jumped from 10% to 30%. At the same time, HDFC, ICICI and IDFC First Bank have touched a new 52-week high. Head of Fundamental Research at Kotak Securities, Rushmik Oza told Moneycontrol that the growth-oriented budget has led to a boom in all cyclic and economic drive sectors including banking and NBFCs.
5 reasons why Nifty Bank has such a huge boom
Bad Bank: In the budget, the Finance Minister announced the formation of asset reconstruction company and asset management company i.e. Bad Bank to clear the loan book of banks and solve their NPA problem. Bad Bank will take over the stressed debt of banks and manage them and issue them to Alternate Investment Funds or other interested investors. This will greatly benefit the banks
Privatization of PSU Banks: Except IDBI Bank and General Insurance Company, the Central Government will privatize 2 more government banks and 1 insurance company in the next financial year. However, which banks and insurance companies will be privatized is not yet clear. But experts at JM Financial say that this will open the way for further privatization of PSU banks. Privatization of any 2 banks can be done from Bank of India, Central Hub Bank of India, Indian Overseas Bank, Bank of Maharashtra or UCO Bank.
Recapitalization of PSU banks: The central government will infuse Rs 20,000 crore of capital infusions in the country’s public banks in the next financial year. This will greatly benefit the banks. Due to this, there is a rally in banking stocks.
Formation of DFI: The Union Government has announced the formation of the Development Financial Institution (DFI) in Budget 2021 to meet the finance needs of infrastructure. This organization will finance projects of infrastructure development. In 3 years, there is a plan to increase its capitalization to at least Rs 5 lakh crore, in which the government will invest Rs 20,000 crore and the remaining amount will be contributed by private players. Financial institutions will also benefit greatly from this, although it is a very ambitious plan and how it will be formed will be a matter to be seen.
TDS exemption on InVITs and REITs dividend: The central government has announced a rebate on TDS in dividends received on investments in infrastructure investment trusts (InVITs) and real estate investment trusts (REITs). Sandeep Upadhyay of Centrum Capital Ltd said that this decision of the government would motivate the Sovereign Wealth Fund to invest in infrastructure projects. Nifty Bank is expected to accelerate further due to these 5 reasons.