Friday turned out to be an inauspicious day for banking stocks. Shares of major banking companies like ICICI Bank, Axis Bank, HDFC Bank and SBI remained among the top losers. Meanwhile, global brokerage UBS Group has warned that a sharp rise in crude oil prices due to escalating tensions in the Gulf region could pose a serious threat to the Indian economy, impacting the banking sector as a whole.
Rising oil prices playing the villain
Global tensions have pushed oil prices to $87 per barrel in the international market. India meets nearly 80–85% of its crude oil demand through imports. In such a situation, any disruption in crude oil supply will add to India’s import bill and eventually fuel inflation. Rising oil prices could also weaken the Indian rupee, slowing economic momentum.
How the banking sector can get impacted
According to UBS, if oil prices increase by $10, it may not have a major impact on the banking sector. Bank earnings could rise by 1–3% per share, while net margins may remain stable. However, if oil prices rise by $20–$30 per barrel, the impact could turn negative. Higher energy prices could push inflation up, reduce consumer spending and eventually slow retail loan growth. In such a scenario, EPS could decline by 4–8%, driven by weaker credit demand, lower fee income and reduced treasury gains.
Market expert’s view
Commenting on the recent share market crash, market expert Ravi R. Kumar said, “Retail investors need not panic over falling indices. The decline is largely due to aggressive profit-booking by bigger players. However, we expect a strong recovery by April.”
Decline in banking stocks
In Friday’s session, ICICI Bank dropped 3.39% at BSE, while Axis Bank opened at 1,345.80 and slipped to 1,315.90, failing to recover towards its Volume Weighted Average Price (VWAP) of 1,324.61. Similarly, HDFC Bank and SBI also remained among the top losers. If you want, I can also make it more news-style (Economic Times/Reuters tone) or more SEO-friendly for a web article.
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