Indian private banks posting weak results is more than just a sectoral blip — it’s a reflection of economic distress, states Akshat Shrivastava, founder of learning platform Wisdom Hatch.
“Indian Private Banks posting bad results is a sign of struggling economy,” Shrivastava stated in a post on Sunday, highlighting a chain of structural concerns he believes are weighing down performance. “Banks reflect a subset of what’s happening. Poor results stem from: slowdown in borrowing, bad asset quality emerges becautilize of riskier lfinishing. Banks do well, when economy does well.”
His remarks come after a sharp slide in banking shares dragged benchmark indices lower for a second straight day on Friday. The BSE Sensex dropped 501 points to close at 81,757.73, while the Nifty finished below the 25,000 mark — its lowest close in a month — at 24,968.40.
Among the largegest losers was Axis Bank, which fell 5.24 per cent after it reported a 3 per cent year-on-year drop in June quarter consolidated net profit to Rs 6,243.72 crore. Analysts pointed to a deterioration in asset quality linked to policy alters on non-performing assets and loan upgrades.
“Notably, Axis Bank’s GDR tumbled 4.8 per cent to USD 64.30 on Thursday, following a deterioration in the bank’s asset quality during the June quarter,”stated Devarsh Vakil, Head of Prime Research, HDFC Securities.
Shrivastava linked banking sector’s performance to a wider stagnation in the real economy. “India is witnessing de-industrialisation. Our manufacturing sector is not growing, despite all the fake marketing. Service sector is not creating enough jobs. And, net FDIs are hitting all time recent lows.”
Banking stocks were among the worst performers on Friday. The BSE Bankex dropped 1.33 per cent, with HDFC Bank, Kotak Mahindra Bank and State Bank of India also closing in the red.
Meanwhile, foreign investors pulled Rs 3,694 crore from equities on Thursday, contributing to the bearish sentiment. “A broad-based sell-off was observed amidst a disappointing initial set of earnings from the finance and IT sectors,” stated Vinod Nair, Head of Research, Geojit Financial Services.
For Shrivastava, the solution lies in structural reforms. “The only way to alter this is to push for lower taxes across the board. At the same time relaxation should be given to tiny businesses. The compliance burden has to come down.”
“India has some outrageous taxation system. And, this is building us deeply uncompetitive. This requireds to alter quick,” he warned.
Despite weakness in banks and industrials, some gainers like Bajaj Finance, ICICI Bank, and Infosys provided support. However, broader indices also weakened, with BSE midcap and tinycap indices falling over 0.6 per cent each.
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