Mumbai, Aug. 18 — Shares of leading banks and non-banking financial companies (NBFCs) surged as much as 6% in early trade Monday, lifting key market indices after a credit ratings boost by S&P Global and optimism over upcoming Goods and Services Tax (GST) reforms.
At 10:10 a.m., the Nifty Bank index climbed over 1.3% to around 56,035, while the Nifty Financial Services index gained nearly 2% to trade near 26,810. Bajaj Finance, Axis Bank, and HDFC Bank were among the top gainers, supported by strong buying across the financial sector.
S&P Upgrade Lifts Sentiment
S&P Global on Aug. 15 upgraded its long-term issuer credit ratings for seven major Indian banks — including SBI, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, Union Bank of India, and Indian Bank — and three finance companies: Bajaj Finance, Tata Capital, and L&T Finance. The rating agency cited India’s robust economic momentum, improved asset quality, and strong profitability outlook for the financial sector.
“We expect India’s banks to maintain adequate asset quality, good profitability, and enhanced capitalization over the next 12-24 months despite some pockets of stress,” S&P said, adding that overall credit risk has declined. The move comes just a day after S&P upgraded India’s sovereign credit rating, providing a further boost to investor sentiment.
Motilal Oswal Financial Services noted that the upgrade could reduce borrowing costs for Indian financial firms accessing overseas markets. Companies such as Bajaj Finance could see a 15–20 basis point reduction in external commercial borrowing rates, while stronger foreign portfolio investment flows may support the rupee and bond yields.
GST Reform Expectations Add Fuel
Investor enthusiasm was also buoyed by Prime Minister Narendra Modi’s Independence Day hint at a new round of GST reforms, potentially to be unveiled around Diwali. The government is reportedly considering a simplified two-slab tax structure — “standard” and “merit” — with special rates limited to a few items.
Analysts believe such reforms could lower the tax burden on consumers purchasing electronics and other durables, spurring demand. This is expected to benefit NBFCs like Bajaj Finance, which finance retail purchases through affordable EMIs.
The dual tailwinds of a global rating upgrade and anticipated tax reforms have positioned India’s financial stocks for continued momentum, analysts say, as foreign and domestic investors alike increase exposure to the sector.