It was all thanks to increased lending, the growth in the economy, digitalization that helped in the growth of the banking sector. Furthermore, banks did run with 50% of their capacity during the lockdowns to help facilitate digitalization and reduce the usage of physical currency.
The stock primarily has several indices such as Nifty50, Nifty Bank, Nifty FMCG and so on. These are a culmination of the top-performing companies in that sector. Keeping tabs on these charts should help understand the trend in the market and how the indices might travel in the future.
But then, when the pandemic hit the country, and the country went under a lockdown for months, it was where every sector was severely hit. No doubt, the impact did chop off several points of all the indices, but the banking sector did recover incredibly in a shorter period.
Factors propelling the banking sector on a bull run:
What was the reason behind it? How did it perform this good? Let’s find out.
• Digitalization
Before the covid impact hit the banking sector, digitalization in banks was slow and steady. This is because there was not enough importance given. However, after the covid impact, things took a turn for good where a greater stride in digitalizing the bank sector came into effect. It’s where the banking sector strengthened its stronghold over, using technology and leaving traditional methods behind.
Furthermore, contactless payments such as payment applications like GPay, PhonePe, Paytm did proper transactions and huge change in the way people shopped for things.
• Growth in the economy
Soon after the pandemic hit the country, with lockdowns and other things in place, the economy contracted vastly and affected millions. However, with the lockdown processes and banks running throughout the pandemic with limited staff quarters, it did help other industries and companies thrive while benefiting itself.
With a sharp rise in the economy in a year, the operations of banks increased, and the demand for things rose. In turn, causing the banks to remain functional and operational even during tough times while reporting massive amounts of net revenue.
• Increased lending
With increased loans and great offers during the pandemic, banks gave out many loans and services. However, the return was also massive as banks reported massive profits and net revenue from these practices. Moreover, through the circulation of money in the country and several other smaller taxes and charges, banks did get huge returns, which helped boost the overall Nifty bank sector in an uptrend direction.
Bottom line
There is denying that the impact of COVID-19 is quite evident even to date despite hitting the market back in March 2020. Nevertheless, things are looking better and might as well be a bull run for quite some time.
However, the banking sector would remain on a bullish run provided everything favors its growth. If there is any correction in the market, it might vary based on the growth and the impact that has caused the correction to happen.