FINNIFTY Declines Sharply; P/B Ratio Hits Multi-Year Lows

The Nifty Financial Services Index (FINNIFTY) is a benchmark index designed to represent the performance of India’s financial market. It includes a diverse range of companies such as banks, financial institutions, housing finance, insurance firms, and other financial services companies. The index is composed of 20 prominent stocks listed on the National Stock Exchange (NSE).

Recent Market Performance

As of 2:54 PM on January 13, 2025, the FINNIFTY index was down by 1.46%, trading below the 22,400 mark. This marks a significant decline of nearly 4.5% over the past 4 sessions, driven by heightened market volatility.

Volatility on the Rise

The volatility index, India VIX, has surged past the 16 mark, reflecting a 7% increase on January 13, 2025. The rise in volatility has amplified the pressure on financial stocks. 

Market Breadth

The market breadth within the Nifty Financial Services Index has been overwhelmingly negative, with 19 out of 20 constituent stocks trading in the red. The sole exception is Axis Bank, which managed to stay in the green.

Key Contributors to the Decline

HDFC Bank and ICICI Bank, which together account for 54% of the FINNIFTY index’s weight, have been major contributors to the index’s fall. These two stocks collectively pulled the index down by approximately 210 points, followed by State Bank of India (SBI) and Bajaj Finance.

Valuation Metrics: A Closer Look at the P/B Ratio

For financial stocks, particularly banks and insurance companies, the Price-to-Book (P/B) ratio is a more pertinent valuation metric than the Price-to-Earnings (P/E) ratio. As of January 10, 2025, the P/B ratio for the FINNIFTY index stands at 2.75.

• This P/B ratio is at the lower end of its 1-year and 2-year range.
• It is also below the average for the past 1, 3, and 6 months, as well as the 1, 2, and 5-year long-term averages.

Year-to-Date Performance

As of January 13, 2025, the FINNIFTY index has declined by 4.70% in the new calendar year.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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