Bank Nifty Tumbles Over 500 Points as SBI, ICICI Bank and Axis Bank Face Heavy Selling Pressure

The Nifty Bank index witnessed intense intraday selling pressure on Monday, sliding more than 500 points from its previous close as heavyweights across public and private sector banking counters retreated sharply.

The sectoral index plunged nearly 1% to touch an intraday low of 54,709.05, down from Friday's close of 55,256.65. The slide in banking counters pulled the broader market into the red, with the benchmark BSE Sensex losing over 500 points and the NSE Nifty 50 slipping below the 22,400 mark.

Key Stock Movements in the Banking Space

Top Banking Laggards:

• State Bank of India (SBI): The country's largest public-sector lender dropped as much as 1.94% to ₹939.55, emerging as the biggest drag within the banking index.
• ICICI Bank: Slipped up to 1.41% to touch ₹1,335.90, leading the decline among large private-sector lenders.
• Axis Bank: Fell nearly 0.92% to trade around ₹1,247.45 under steady selling pressure.
• Punjab National Bank (PNB): Dropped 1.56% to ₹115.15, tracking weakness across state-run peers.
• Canara Bank & Union Bank of India: Shed 1.28% and 1.21%, respectively, compounding the broader public sector banking rout.

Other major private lenders also traded lower, with HDFC Bank declining 0.31% to ₹705.05 and Kotak Mahindra Bank easing 0.12% to ₹440.45. Consequently, the Nifty PSU Bank index tumbled 1.43%, while the Nifty Private Bank index fell 0.61%.

RBI Liquidity Measures and Surging Bond Yields

The immediate catalyst behind the sudden sell-off was a series of liquidity-draining measures announced by the Reserve Bank of India (RBI) over the weekend. The central bank indicated an increase in banks' minimum daily Cash Reserve Ratio (CRR) maintenance requirement from 90% to 99% beginning October 16. In addition, the central bank notified an open market operation (OMO) sale auction of government securities worth ₹25,000 crore to absorb surplus liquidity.

The anticipated liquidity drain triggered an aggressive rise in domestic government bond yields. The yield on the benchmark 10-year government security climbed as high as 7.3707%, up from 7.2994% at the previous close, marking its eighth consecutive week of increases.

Implications for Indian Investors

For banking sector investors, the confluence of rising sovereign yields and tightened system liquidity poses dual challenges:

• Treasury Losses: Rapidly rising bond yields depress government securities prices, raising the prospect of mark-to-market (MTM) losses on banks' investment portfolios in the upcoming quarters.
• Funding Pressures: A tighter liquidity environment is likely to keep deposit competition elevated, pushing up funding costs and potentially capping Net Interest Margin (NIM) expansion.

While broader equity benchmarks experienced collateral weakness from the banking fall, analysts note that the technical breach of key immediate supports will make bank stocks sensitive to incoming monetary signals and wholesale borrowing rates in the sessions ahead.

Tags: Bank Nifty State Bank of India ICICI Bank Axis Bank Reserve Bank of India Banking Sector