Indian shares log weekly gains as earnings optimism fuels banks

Indian share benchmarks logged weekly gains, helped by a tactical bounce on Friday, as optimism around earnings recovery fueled gains in banks, while worries about U.S.-Iran tensions and AI disruption weighed.

The Nifty 50 added 0.46% to 25,571.25 on Friday, and the BSE Sensex rose 0.38% to 82,814.71. They rose 0.4% and 0.2% for the week.

Twelve of the 16 major sectors logged weekly gains. The broader small-caps fell 0.2% while mid-caps added 0.1%.

State-owned banks were the top sectoral gainers, rising 5.5% for the week.

The index added 8.9% in two weeks on post-earnings optimism.

“PSU banks have been beating expectations while private sector banks have been lagging,” said Suresh Ganapathy, managing director and head of financial Services research at Macquarie Capital.

Ganapathy added that strong asset quality, sub-40-basis-point credit costs, and potential for increase in foreign holdings been helping gains in state-owned lenders.

Private sector banks and financials rose 0.8% and 0.3% for the week, underperforming the PSU banks.

Among other gainers, energy and FMCG stocks added 2.4% and 1.7%, respectively, for the week.

However, the concerns over AI disruption in the IT sector and rising crude oil prices due to U.S.-Iran tensions have dimmed earnings optimism, per analysts.

Higher crude prices are a negative for India, the world’s third-largest crude oil importer.

While the market outlook has improved, with strong earnings and attractive valuations after 16 months of underperformance, geopolitical risks persist and AI-related disruption could weigh in the near term, said Sunil Singhania, founder of Abakkus AMC.

India VIX - a measure of the market’s expected volatility for the next 30 days - spiked this week to 14.36, just shy of an eight-month high hit on the day of the federal budget on February 1.

The IT index fell 2.1%, marking a fifth consecutive week of losses, in its longest losing streak in six months on AI disruption fears.