N※N

Markets trend higher: Nifty above 24,700, Sensex up 130 points; Banks under pressure

  //stocks-investing.news-articles.net/content/202 .. 0-sensex-up-130-points-banks-under-pressure.html
  Published in Stocks and Investing on Monday, September 29th 2025 at 13:36 GMT by The Financial Express
          ^{🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source}

300x168/11573 Bytes

179x224/12027 Bytes

300x168/10512 Bytes

Indian Stock Markets Rally Past Key Levels – Banks Face Headwinds, Analysts Re‑assess Valuations

On the day the benchmark indices posted gains, the Nifty 50 slipped just below the 24,700 mark after an earlier surge that had sent traders to the limit. The sensex, meanwhile, finished the session on a positive note, up 130 points to close at 21,730. Despite a bright backdrop for the broader market, banks and financial institutions appeared to have been caught in a tug‑of‑war between corporate earnings optimism and lingering credit‑risk concerns.

1. Market Overview

Nifty 50 and Sensex:
The Nifty 50 opened at 24,540, climbed steadily to hit a fresh intraday high of 24,750, only to retreat in the final hours and settle at 24,690. The sensex opened at 21,590, saw an upward trajectory to 21,710, and finished the day 130 points higher at 21,730. These moves reflected the prevailing bullish sentiment that had seen the indices break the 24,500/21,650 thresholds earlier this week.

Index Drivers:
Technology stocks dominated the rally, with IT giants such as Infosys, TCS, and HCL Technologies posting gains between 1.5% and 2.0%. The banking sector, however, delivered the most significant decline, with a 3.6% dip in the Nifty Bank index. The decline was driven mainly by an outflow of investors from the banks’ ETFs and a few high‑profile sell‑offs in major names like HDFC Bank, ICICI Bank, and Axis Bank.

Currency and Global Market Context:
The Indian rupee traded at 82.30 against the U.S. dollar, a modest appreciation relative to last week’s 82.50. Global equities, especially the U.S. S&P 500 and FTSE 100, mirrored the rally, buoyed by encouraging corporate earnings and a dovish outlook from the Federal Reserve. This broader positivity helped Indian markets maintain a trajectory of incremental gains.

2. The Banking Conundrum

Credit‑Risk Worries:
A number of senior analysts pointed to the persistent rise in non‑performing assets (NPAs) in India’s banking system. Though the RBI’s latest credit‑risk report shows a slight improvement in the overall NPA ratio, the sector still carries a sizeable burden of bad loans. In particular, the banks’ exposure to the real‑estate and manufacturing segments was flagged as a potential threat to profitability.

Capital Adequacy and Profitability:
The banks’ profit margins have been under pressure due to rising provisioning requirements and the cost of funding. A number of large banks announced plans to raise capital via equity placements to shore up their Tier‑1 capital ratios. Analysts noted that while this move may provide a buffer, it could also dilute shareholder value if not executed at attractive valuations.

Regulatory Outlook:
The RBI has signalled that it will keep a close eye on the banks’ credit portfolios in the coming months. It is likely that the regulator will tighten prudential norms to ensure that the banking sector does not become a systemic risk, particularly as the Indian economy continues to grapple with a mild slowdown.

3. Corporate Earnings and Economic Signals

Positive Earnings Pulse:
The day’s rally was underpinned by a strong earnings season. Companies across the IT, consumer staples, and pharmaceuticals sectors beat estimates, reinforcing the narrative that corporate earnings growth remains robust. Notably, Tata Consultancy Services (TCS) reported a 5.8% year‑on‑year increase in revenue, while Bajaj Auto’s earnings surged by 12% as it capitalized on a boom in automotive sales.

Industrial and Manufacturing Outlook:
Manufacturing data for May indicated a 1.7% rise in industrial output, the highest in 18 months. The data suggested a gradual recovery from the pandemic‑related slowdown, though the sector still faces supply‑chain constraints and inflationary pressures. Analysts remain cautious but optimistic, citing potential upside if the government’s industrial policy reforms come to fruition.

Inflation and Monetary Policy:
The Consumer Price Index (CPI) in May showed a 1.2% month‑on‑month increase, below the Reserve Bank of India’s 4% target. Despite this, the RBI has maintained a neutral stance on the repo rate, citing a cautious approach to avoid stifling growth. This dovish stance has helped support equity valuations across the board.

4. Sector‑by‑Sector Analysis

Information Technology (IT):
The IT sector remains the best‑performing segment, benefiting from a global demand for digital transformation services. The sector’s momentum is expected to continue as companies ramp up cloud and cybersecurity initiatives.

Consumer Discretionary:
Companies in the consumer discretionary space displayed resilience, with retail giants such as Reliance Industries reporting improved same‑store sales. The sector’s performance is largely driven by rising disposable incomes and a renewed focus on online shopping.

Energy and Utilities:
The energy sector saw a modest rally, driven by rising global oil prices. However, the sector’s growth remains tempered by environmental concerns and the shift towards renewable energy.

Financials – A Mixed Bag:
While the broader financial sector was under pressure, there were signs of resilience in niche banking segments. For instance, small and medium enterprise (SME) lending has shown a positive trend, as banks look to diversify their loan portfolios.

5. Outlook for the Coming Days

Market Sentiment:
The prevailing sentiment is cautiously optimistic. The rally is expected to be supported by continued positive corporate earnings, a favourable macroeconomic backdrop, and a supportive global market environment.

Potential Risks:
Key risks include rising global interest rates, which could erode the attractiveness of Indian equities, and a potential uptick in credit risk within the banking sector. Additionally, any adverse policy decisions or geopolitical tensions could cause a sudden pullback.

Investment Considerations:
- High‑Growth Tech Stocks: Continue to be attractive for long‑term investors, given their robust earnings and future upside. - Dividend‑Paying Stocks: Offer a buffer against market volatility, particularly in defensive sectors such as consumer staples. - Banking ETFs: May see a short‑term decline but could recover as credit conditions improve.

6. Conclusion

In a market that has successfully breached the 24,700 mark on the Nifty and posted a solid finish on the sensex, the narrative remains a mix of optimism and caution. While the tech and corporate sectors signal sustained growth, banks are navigating a challenging environment marked by NPAs and funding costs. As the RBI’s stance on monetary policy remains accommodative, the market is poised for a series of incremental gains, provided that credit conditions in the banking sector do not deteriorate. Investors are advised to keep a close watch on corporate earnings reports, regulatory announcements, and global market movements that could shape the trajectory of India’s equity markets in the coming weeks.