Indian Banks see robust market cap growth in Q2 2025 amid rate cuts and liquidity boost: Report

New Delhi [India], July 9 (ANI): Indian banks witnessed significant gains in market capitalisation during the April-June quarter of 2025, driven by falling interest rates and increased liquidity, which collectively attracted investor confidence.

According to S&P Global Market Intelligence data, 18 of the top 20 Indian lenders, including the nation's three largest, saw their market cap rise.

HDFC Bank Ltd., India's largest bank by market cap, registered a strong 9.70 per cent increase in its market capitalisation. Its private sector counterpart, ICICI Bank Ltd., also posted a healthy gain of 7.43 per cent.

State Bank of India, the country's biggest lender by assets, saw its market cap climb by 6.33 per cent.

The positive sentiment in the banking sector mirrored broader market trends, with India's benchmark Nifty 50 index rising 8.5 per cent and the Nifty Bank index, comprising the most liquid and largest Indian banks, surging 11.1 per cent over the same period.

Global investor confidence was also buoyed by expectations that planned tariff measures by US President Donald Trump would be less disruptive to global supply chains than initially anticipated.

Despite these positive trends, concerns linger regarding slowing credit and deposit growth, which could potentially pressure bank margins in an environment of declining interest rates.

The Reserve Bank of India (RBI) reported on June 25 that credit growth for commercial banks slowed to 9.9 per cent year-over-year in May, down from 16.2 per cent a year ago.

The central bank has projected the nation's GDP to grow at 6.5 per cent in the current fiscal, a rate similar to the previous year. The RBI has cut its benchmark interest rate by 100 basis points since February.

To counter slowing credit growth and inject liquidity, the central bank has taken many other measures as well this including reducing the ratio of deposits banks must maintain as cash. Banks, in turn, have lowered interest rates on deposits and indicated that stress in unsecured retail loans may be reaching its peak, according to a Nomura note dated June 25.

The report adds that, among the top-performing banks in the second quarter, AU Small Finance Bank led the pack with an impressive 53.05 per cent surge in market cap. IndusInd Bank also saw a substantial gain of 34.20 per cent, recovering from a notable decline earlier this year following accounting lapses.

Conversely, Kotak Mahindra Bank experienced a slight decline of 0.35 per cent. State-owned UCO Bank recorded the largest loss during the quarter, with its market capitalisation falling by 9.24 per cent, according to S&P Global Market Intelligence data. (ANI)