Banking boom! Indian markets in 2025 have been turbo-charged by financials. The Nifty Bank and Financial Services indices hit record highs as banks and NBFCs (non-bank financiers) soared. For example, Reuters reports financial stocks jumped ~1.8% to new peaks after the June rate cut. This wasn’t a one-day wonder: Bajaj Finance – a big NBFC – is up ~31% so far this year. Even with the benchmark Nifty up only ~5% YTD, bank stocks have led the rally. In short, the finance sector (banks + NBFCs) has become the star of the 2025 market story.
Why the rally? Rate cuts & liquidity. In June, the RBI surprised markets with a hefty 50 basis-point repo cut (to 5.5%) and slashed bank reserve requirements by 100 bps. These moves inject cash into the system: the RBI estimates the CRR cut alone will free up about Rs 2.5 trillion by year-end. More liquidity and cheaper funding mean banks can lend more and earn higher margins. Money now flows into credit and capital markets (since deposit rates are low), lifting all finance stocks. Analysts even project loan growth climbing – after a slowdown – to ~12% in FY26 as cheaper rates spur demand
Credit growth and asset quality. Banks are healthier than they’ve been in years. Industry data show banks’ gross NPAs are around a multi-decade low (~2.3% of loans). As bad debts shrink, private banks and NBFCs can take on more consumer/business loans. RBI’s recent easing (like relaxing personal-loan rules) aims to jumpstart credit to households and MSMEs. Indeed, some lenders note a boom in retail loans as rates fall. For now, overall loan growth was modest (under 10% mid-2025, but economists expect it to rebound. Lower NPAs and accelerating credit (especially in home, auto, and small business loans) underpin higher bank profits.
NBFC heroes & buoyant markets. On the stock side, marquee NBFCs have led performance. Bajaj Finance, AU Small Finance and others hit fresh highs on strong earnings and growth potential. Big private banks like HDFC Bank and Kotak have seen their share prices jump to new peaks (up 15–20% YTD). Part of this reflects global finance flows: buoyant Indian markets (Nifty’s gain, record IPOs) mean more lending and fees for brokers and financiers. Even PSU banks are catching up as Treasury yields stay low and credit picks up. The broad market is also fine-tuning: 13 sectors are rising, but banking/finance is visibly outpacing them.
In short: Banking stocks are leading the charge because the underlying economics support them. RBI’s rate cuts and record liquidity give banks more firepower to lend. Asset quality has improved sharply (NPAs ~2–3% vs. double digits a few years ago, so earnings are steadier. Credit growth is set to revive, and retail borrowers are back in market. Chart-gurus note how every time liquidity flows, it finds financials first. The result: as Indian markets climb, financial services have been riding shotgun at the front of the rally. All this data-backed momentum suggests banks and NBFCs aren’t slowing down soon
Disclaimer: This content is for educational purposes only and does not constitute investment advice.