Financial Services Lead Market Surge in H1 2025, Driven by Reforms and Investor Optimism
India’s financial services sector has emerged as the top performer in the first half of 2025, with the Nifty Financial Services Index soaring nearly 15.5% year-to-date (YTD), according to data released by NSE on Friday. This outperformance highlights rising investor confidence and improved macroeconomic sentiment.
On Friday, the index touched a record intra-day high of 27,305.6, marking a substantial 22.19% gain from its 52-week low of 22,320.85. A 1.5% uptick in Thursday’s session added further momentum, supported by favorable external cues such as easing geopolitical tensions, declining crude oil prices, and a softer US dollar. These conditions have prompted increased foreign portfolio investment, while domestic institutional investors (DIIs) continue to provide strong support to the rally. Investor sentiment is also buoyed by expectations of robust corporate earnings in the April–June quarter of FY26, especially from banking, insurance, and NBFC segments.
The index has been on a consistent upward trajectory, registering monthly gains of 3% in June, 1.3% in May, 6.5% in April, and 9.2% in March. Minor corrections in January (-1.7%) and February (-0.6%) were quickly offset in subsequent months.
A key catalyst for the sector’s bullish outlook has been the Reserve Bank of India’s (RBI) final guidelines on project finance, which are viewed as more accommodative than the earlier draft.
According to Motilal Oswal Financial Services (MOSL), the revised norms lower provisioning requirements for under-construction projects, significantly easing pressure on lenders. Standard provisioning has been reduced to 1–1.25% from the previously proposed 5%, and may further drop to 0.4% once projects become operational, depending on their category.
These regulatory changes are seen as a major relief for the banking sector, reducing capital stress while encouraging renewed lending for infrastructure and long-term projects.
