The clout of lenders’ stocks in the Nifty had eased after Covid-19 struck the global economy, heightening fears that the economic disruptions could result in sharp spikes in bad loans. The financial sector, which dominated the benchmark index for over a decade lost nearly 11 per cent weightage in the index between January and May last year.
Many firms in the BFSI sector have, however, surprised the market for two consecutive quarters. Nifty PSU Bank and Nifty Bank indices were the top performing indices on the NSE over the last one month with 17.6 per cent and 15.7 per cent returns, respectively.
Oil & gas and consumer sectors have lost 3 per cent each in the Nifty mainly due to the underperformance by sector leaders such as HUL, Nestle and Asian Paints. The Oil & Gas sector has lost 3 per cent weight mainly because of Reliance Industries whose weight declined from a high of 14.9 per cent in September last year to 9.95 per cent now.
“BFSI sector’s weight in Nifty is expected to go up further as earnings of banks and NBFCs for December quarter are better than expected and asset quality is also not that bad as expected,” said Gautam Duggad, head of research, Motilal Oswal Financial Services. “With the recovery in economy, asset quality will also likely to improve for most of the banks going forward.”
