How did India's top 5 banks recover Post Lockdown

History and Comparison:

In the last 2 decades, the global economy faced 2 major crises which had a severe impact on the capital market. One was in 2008, The most severe financial crisis since the great depression and another which currently the entire world is facing i.e. health crisis due to COVID-19 which impacted the global economy severely. 2008 was triggered by the collapse of the housing bubble in the U.S., the crisis resulted in the collapse of Lehman Brothers (one of the biggest investment banks in the world), brought many key financial institutions and businesses to the brink of collapse, and required government bailouts of unprecedented proportions. It took almost a decade for things to return to normal, wiping away millions of jobs and billions of dollars of income along the way. 

We have never had a global recession or market meltdown triggered by a public health crisis in modern history. Recent recessions and market meltdowns were triggered by economic/financial causes. But now, we have a market meltdown triggered by a global pandemic.

In 2008, Nifty crashed 65% from the peak; but that was spread over several months. This time a 30 percent crash happened within a few days. In the mother market US, Dow crashed 32 percent in 18 days.

Based on a study published by “Atlantic Council” - below are the similarities and difference between 2008 and 2020 crisis: 

Similarities:

• Uncertainty: Both crises share the key factor of uncertainty. Uncertainty can be defined as a non-quantifiable risk following the thought as per Frank Knight [1921]. It is a risk that cannot easily be traced so that its probability of occurrence and its impact can hardly be predicted.

• Collapse: The initial drops in the stock exchanges of major countries (up to one-fourth of their valuation) have been analogous between both crises. And both global recessions have been successively qualified as the largest since the Great Depression.

• Reactions: To limit such shocks, monetary, fiscal, and other government policies have in both cases provided massive support. Eg. Stimulus package by Central Government of India of around Rs. 20 Lakhs Crores, FED stimulus package of around $2 Trillion, RBI revised policies, etc.

Differences:

• Process: The COVID-19 crisis has spread quickly all over the world which led to the disruption of supply chain management. While the 2008 Financial crisis was driven by the real estate sector which further impacted other sectors.
• Speed and Shape: Speed and shape can be easily seen in below 2 graphs:

Impact on Nifty 50 index:

     2008 Financial Crisis [2.5 Yrs.]                          COVID-19 Crisis [5 months]

• Others: Other facts differentiating these both crises include government perspective for the Policies and collective efforts with one purpose by everyone.

Recovery in Top 5 Banks Post COVID-19 Period:

Note: Share prices till 13th July 2020 have been considered to conclude on post lockdown high price and recovery %