The positive outlook on the power and banking sectors leading to the recent rally in the benchmark indices is expected to sustain with substantial stimulus in the Budget to boost manufacturing activity in the country.
The BSE Bankex rallied 8 per cent to 60,444 on Thursday against 55,998 in April. Similarly, BSE Energy index has jumped 5 per cent to 12,957 on Thursday against 12,384 points in April.
The demand for electricity has increased substantially due to usage of cooling appliance and air conditioners amid extreme heat conditions.
Power consumption up
Power consumption in June jumped 9 per cent to 152.4 billion units (BU) against 140.27 BU logged in same period last year. In May, the peak demand touched 250 GW, surpassing last year’s peak of 243 GW recorded in September, 2023.
The peak power consumption is expected to touch an unprecedented 260 gigawatts by October this year. With the rampant economic activity, the government anticipates the country’s peak power demand to hit 400 GW by 2031-32, exceeding the previously projected 384 GW.
The banking sector is also well poised to take advantage of the ensuing private capex cycle with the gross non-performing asset ratio at a multi-year low of 2.8 per cent and net non-performing asset ratio at 0.6 per cent.
Nuvama expects loan growth in the banking to hold up with most lenders reporting q-o-q growth and this will increase the loan to deposit ration in the banking sector.
Loan growth
Even seasonally, loan growth for private sector was up 2–5 per cent q-o-q and 1–3 per cent for PSU banks. PNB has guided a loan growth of 3 per cent-plus q-o-q. HDFC Bank, IDFC First and Bandhan Bank may not see a rise in LDR given their already high base.
Arvinder Singh Nanda, Senior Vice-President, Master Capital Services said the country’s energy consumption grew by 6.5 per cent last year largely due to increasing energy needs amid economic growth. This trend highlights opportunities in the energy sector, tempered by market dynamics and policy shifts.
Effective management of NPAs in the banking sector and ensuring sustainable loan growth are critical benchmarks of stability and resilience within the banking industry, he said.
A balanced strategy that integrates rigorous risk management and ongoing market evaluation is essential for stakeholders navigating the intricate and evolving market landscape, he added.