How has banking sector performed good despite the pandemic and lockdowns in the country?
- Asked By
- Updated On:23-Jun-2021
- Replies:1
Short Answer
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.
Detailed Answer
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.
Ask Your Query for FREE, Get quick answers from our FINTRAKK community!
Discussion (0)
Mutual funds are professionally managed investment vehicles that offer numerous categories of funds to investors. To generate regular cash flows or income, investors can use the Systematic Withdrawal Plan or invest in Dividend Payout and Debt funds to receive regular income. Debt funds provide regular interest payouts, whereas dividend payout funds give regular dividends which act as regular income.
Good quality IPOs are great options for investors when considering investing in an IPO. However, IPOs should not be taken as money multiplier instruments and invested in. Multiple IPOs have performed badly due to extremely high valuations and poor financials. Hence, it is important to evaluate the financials of the company before investing in them.
Undertaking fundamental analysis and proper research is essential before investing in any particular stock. Apart from this, you should also consider asking seven key questions like 'What does the company do', 'How is it placed among its peers', 'How is the management of the company', etc before investing in it.
You can choose any bank in India to open an account in, be it a private-sector bank or a public-sector bank. By the market share SBI, HDFC, and ICICI Bank are the three top banks that can be considered when looking at the largest banks in India.
A well-known financial organisation in India is PNB, popularly referred to as Punjab National Bank. But is this bank reliable? Examine PNB's operations, client happiness, and reputation more closely.
Fundamental analysis is an important part of stock investing. You can either refer to the company’s quarterly reports for the data or use any fundamental analysis and stock screening platform to analyse the data. Using a stock screening platform makes the job much easier as you get all the necessary data curated in one single place.
There are various terms that play a huge role in determining how to choose stocks for long term investment such as P/E ratio, dividend consistency, etc. For a more elaborative information head below and read the explanation given for better understanding.
India Post Payments Bank or IPPB, a Government of India owned payment bank was launched on 1st September 2018 offering doorstep banking especially in rural areas of India. The features include 4% Internet on savings banks accounts, easy money deposit, withdrawals, doorstep banking facilities, micro-ATM facilities and much more.
Looking into the interest rates, minimum savings required in the account, easy online facilities are few of the many options you should consider while choosing a savings account with any respective bank.
cKYC is known as Central KYC, is a centralized registry for maintaining the KYC records of an individual digitally. The cKYC registry was launched July 2016, with an aim to reduce the level of documentation and KYC verification process involved in a financial transaction with different financial institutions including Banks, Insurance, NBFCs and Mutual Funds.