Nifty Bank Hits Record High — Key Drivers Behind Advance

The Nifty Bank index surged to a new record high of 58,609.20 on Thursday, gaining 0.57%, as optimism strengthened around large private sector lenders and public sector banks. The move reflects growing confidence in the banking sector’s earnings resilience, asset quality improvement, and macroeconomic support from easing inflation.

The rally in Nifty Bank has been underpinned by strong second-quarter results and a favourable interest rate outlook. Both private and state-owned banks have reported robust credit growth and improving profitability metrics, boosting investor sentiment.

The index rose 0.57% to 58,609.20, but it pared gains to trade 0.46% higher at 58,543.85 as of 11:15 a.m.

“From a macro perspective, the backdrop remains broadly supportive for equities, with October CPI inflation easing to a record low and strong second-quarter earnings from PSU banks, autos, metals, and FMCG adding further depth to the ongoing rally,” said Ponmudi R, CEO of Enrich Money.

Banks delivered healthy growth in both credit and deposits during the September quarter. Loan demand remained broad-based across retail, corporate, and SME segments, while deposit mobilisation accelerated with improving liquidity conditions.

Asset quality across the banking system continued to strengthen. Better recoveries, lower slippages, and prudent provisioning have contributed to cleaner balance sheets, particularly among PSBs that have benefited from earlier reforms.

Banks posted stronger-than-expected profitability in the second quarter, driven by sustained credit momentum, lower credit costs, and improving efficiency ratios. Several large lenders also reported better fee income growth and cost control, adding to the sector’s earnings momentum.

October’s Consumer Price Index (CPI) inflation eased to a record low, increasing expectations of a rate cut in the coming quarters. A lower interest rate environment is typically favourable for banks, as it reduces funding costs and stimulates loan demand.

Despite concerns about deposit repricing, several banks delivered a positive surprise on NIMs during quarter ended September, supported by a sharper reduction in deposit costs and efficient management of lending rates.