The Yin And Yang Of 2025: Contrasting Fortunes For Banking And Tech Shares

Nifty Bank and Nifty IT have moved in opposite directions so far in 2025. The banking index has gained nearly 10%, while the IT index has declined by the same margin.

Nifty Bank's performance reflects strengthening domestic economic conditions. In contrast, the IT index typically relies on a supportive global environment that drives discretionary spending and deal wins for Indian IT services companies.

Over the last 15 calendar years, Nifty Bank has outperformed Nifty IT in eight years, while the IT index has led in five. In two years, the two indices posted identical returns. In five of the eight years when Nifty Bank outperformed in the first half, it continued to outperform in the second half as well.

Muted Outlook For Banks Despite Policy Support

The outlook for Indian banks remains muted despite supportive policy actions. The Reserve Bank of India has cut key interest rates by 100 basis points and reduced the cash reserve ratio. It has also taken liquidity enhancement steps aimed at improving credit availability.

These measures are expected to support economic activity, with their full impact likely to reflect in the second half of FY26. As borrowing costs decline, credit growth is expected to improve.

New project financing norms, announced in a more relaxed form than earlier draft guidelines, are also expected to benefit public sector banks.

IT Faces Global Headwinds

With the global environment continues to be marked with global policy developments such as the reciprocal tariffs introduced by the US, and the escalation of conflict between Iran and Israel, expectations of inflation rising remain an ever-present concern.

Rising inflation tends to impact the outlook on discretionary spending, which in turn affects the deal-win trends for IT services companies.

With the first-quarter results for IT services companies set to be announced in the next two weeks, Accenture's quarterly results were a key monitorable.

Even though the lower band for Accenture's full year revenue growth guidance was revised upwards, the deal wins remains muted, which could impact sentiment for IT stocks ahead of their results.