Nifty Bank : replica of banking industry trends

Nifty Bank

Bank Nifty is an Index to benchmark for Indian banking industry which represents 12 most liquid and largest capitalized stocks trading on National Stock Exchange from the Indian banking sector, Which is a free float market capitalization weighted index with a base date of 01-01-2000, the index base value is 1000. It's also known as CNX Bank Index. It was launched by India Index Service and product limited (IISL).

Banks are an integral part of Economy and the banking sector in India is facing tremendous challenges today which directly impacts the health of the Indian Economy . Being an Index from banking sector following challenges are impacting Bank Nifty :

·         The biggest issue which has always been a matter of concern and still is the Asset Quality of the bank business portfolio. Asset Quality has faced sustained pressure due to continued economic trends. The NPA levels are surging up. The gross NPA till Sept 15 was 5.1% which is remarkably high and continuously growing. 

·         Drought situation in India: This is the biggest cause impacting the health of balance sheets of Indian Banks. On one hand where it's mandatory to give PSL Advances on the other recovery gets extremely difficult from Agri loans due to climatic issue, which decreases the repaying capabilities of Indian farmers to the extent that the they commit suicide As per the data presented in Rajya Sabha on March 4, 2016:  3228 farmers committed suicide only in Maharashtra in 2015 and the average being 9 farmers per day!

·         Interest rate hike in US Markets: Hike in interest rates by US is also a concern for both domestic and international markets, Vaibhav Agrawal, VP and head of research, Angel Broking, said, “Indian equity markets would have external challenges to face, which includes concerns emanating from any slowdown in the global markets, announcement of rate hikes in the US.”

·         Capital Adequacy: The provisions makes banks keep money aside for unforeseen events such as defaults or NPA to be particular. Banks capital is measured by this ratio. The same is being a matter of concern for Indian public sector banks .

·         Regulatory aspects and Compliance: To run the business in such a competitive environment many times employees takes deviations from the policies and procedures which are a big matter of concerns it may be knowingly or unknowingly which ultimately leads to loss to the banking industry as a whole.

The above are not the only challenges banks are facing the list is still adding more issues. Nifty Bank being an index for the banking companies replicates the same trend.

Thanks for the reading ! Have a nice day.