According to a latest report, India’s public sector banks have posted the best-performance among its Asia-Pacific peers in the quarter ended 30 September, 2023, reflecting growing investor interest and the banks’ stronger financials metrics.
Country’s state-owned lenders dominated the rankings for the second straight quarter, occupying 10 of the top 15 slots. Indian Overseas Bank’s total returns rose 91.60% in the quarter, placing it at the top of the list, followed by Central Bank of India with a rise of 76.59%, data compiled by S&P Global Market Intelligence showed.
Indonesia’s PT Bank Nationalnobu Tbk held the third spot, with total returns up 74.80% in the July-September quarter. Two Japanese banks and one each from Pakistan and Sri Lanka filled the remaining slots.
“India Inc. will offer a rich hunting ground for international investors looking to diversify their holdings,” Prashant Kothari, senior investment manager on Pictet Asset Management’s emerging equities team, said in a note to investors on 4 October, 2023. “Indian equities received substantial foreign inflows in 2023, with the market attracting net USD16 billion so far this year — representing more than half of total net inflows into global stocks,” he added.
While domestic equities have outpaced their global counterparts in emerging markets for some time, India’s stock market hit an all-time high valuation of $3.8 trillion last month. The Nifty 50 and BSE Sensex have risen 11.06% and 9.69%, respectively, in the past six months, while the Nifty Bank index gained 7.73%.
According to Sandeep Upadhyay, MD of infrastructure practice at Centrum Capital, PSU banks’ stock performance could be attributed to a “massive clean-up of their balance sheets” and their lower valuations. In addition to the significant improvement in asset quality, some large PSBs have seen a 2-3x correction in their market capitalization since the pandemic, with still enough scope of improvement in their future prospects, he added.
As per the findings of the global ratings agency, Indian banks have gained significantly in recent years from high loan growth and improved margins in a fast-growing economy, making them attractive for both domestic and foreign investors.
Bank credit in India has also seen a robust uptick in recent months, with Jefferies analysts forecasting it to further stabilize around 13% to 14% in the short-term. India’s economy is expected to expand 6% to 7% annually until 2026 at least, making it the fastest-growing major global economy, S&P Global added.
Worst-performing bank stocks
The collated data shows that, 10 banks from East Asia ranked among the 15 worst-performing Asia-Pacific bank stocks by total returns, with the remaining slots taken by three banks from Indonesia and one from the Philippines and Vietnam each.
The list also featured seven banks in mainland China, broadly in line with the poor performance of Shanghai stock exchange’s SSE Composite Index, which fell nearly 3% and the Hang Seng Mainland Banks Index, which fell 11% in the third quarter.
