Indian private banks posting weak results is more than just a sectoral blip — it’s a reflection of economic distress, says Akshat Shrivastava, founder of learning platform Wisdom Hatch.
“Indian Private Banks posting bad results is a sign of struggling economy,” Shrivastava said in a post on Sunday, highlighting a chain of structural concerns he believes are weighing down performance. “Banks reflect a subset of what’s happening. Poor results stem from: slowdown in borrowing, bad asset quality emerges because of riskier lending. Banks do well, when economy does well.”
His remarks come after a sharp slide in banking shares dragged benchmark indices lower for a second straight day on Friday. The BSE Sensex dropped 501 points to close at 81,757.73, while the Nifty ended below the 25,000 mark — its lowest close in a month — at 24,968.40.
Among the biggest losers was Axis Bank, which fell 5.24 per cent after it reported a 3 per cent year-on-year drop in June quarter consolidated net profit to Rs 6,243.72 crore. Analysts pointed to a deterioration in asset quality linked to policy changes on non-performing assets and loan upgrades.
“Notably, Axis Bank’s GDR tumbled 4.8 per cent to USD 64.30 on Thursday, following a deterioration in the bank’s asset quality during the June quarter,”said Devarsh Vakil, Head of Prime Research, HDFC Securities.
Shrivastava linked banking sector’s performance to a wider stagnation in the real economy. “India is witnessing de-industrialisation. Our manufacturing sector is not growing, despite all the fake marketing. Service sector is not creating enough jobs. And, net FDIs are hitting all time recent lows.”
Banking stocks were among the worst performers on Friday. The BSE Bankex dropped 1.33 per cent, with HDFC Bank, Kotak Mahindra Bank and State Bank of India also closing in the red.
Meanwhile, foreign investors pulled Rs 3,694 crore from equities on Thursday, contributing to the bearish sentiment. “A broad-based sell-off was observed amidst a disappointing initial set of earnings from the finance and IT sectors,” said Vinod Nair, Head of Research, Geojit Financial Services.
For Shrivastava, the solution lies in structural reforms. “The only way to change this is to push for lower taxes across the board. At the same time relaxation should be given to small businesses. The compliance burden has to come down.”
“India has some outrageous taxation system. And, this is making us deeply uncompetitive. This needs to change fast,” he warned.
Despite weakness in banks and industrials, some gainers like Bajaj Finance, ICICI Bank, and Infosys provided support. However, broader indices also weakened, with BSE midcap and smallcap indices falling over 0.6 per cent each.
