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Bank stocks are once again building up their muscles. The most influential segment of the nation’s $5.4 trillion equity market currently commands almost 33% weight on the Nifty50 index.

The bounce back in these lenders is phenomenal considering the kind of underperformance that the sector had during the beginning of 2024.

In February this year, the combined weight of six lenders on the Nifty50 basket had plunged to a five-year low. However, the recent outperformance of bank stocks – especially those of HDFC Bank and ICICI Bank helped them to turn the corner.

Since August, the aggregate weight of bank stocks on the index has increased five percentage points (ppt) to 32.5%. Thanks to stellar rallies in shares of large lenders including State Bank of India (SBI). On Thursday, shares of HDFC Bank climbed to their record high of Rs 1879.95 on the NSE, whereas those of ICICI Bank are trading less than 2% away from their record high.

On the other hand, shares of State Bank of India have gained 35% between January and now compared to 14% gains clocked by the benchmark Nifty50 during the same period.

The largest private lender- HDFC Bank – enjoys the highest weight on the Nifty50 as it powers 13.4% of the index. While ICICI Bank comes second with a weight of nearly 9%, SBI’s weight on the gauge stands at 3.2%.

Reliance Industries – the largest company by market capitalisation – had a weight of 8.6% as of Thursday’s close. The stock of ICICI Bank has rallied as much as 34% so far in 2024, boosting its weight on the index to about 9%. The second largest private lender is also the second-weighted stock on the Nifty50. On the other hand, Reliance Industries commands a weight of 8.6% as of Thursday’s close.

To be sure, the Nifty50 index has rallied as much as 6% from its November lows with HDFC Bank and ICICI Bank contributing almost 30% to the gain. Stocks’ weight on an index is computed based on their float-adjusted market capitalisation and those with higher weights have more influence on the gauge.