A bruising few weeks for Indian banking stocks got a little worse on Thursday, April 9, as Nifty Bank index closed 1.6 per cent.
Every single constituent in the index was an intraday loser, with IndusInd Bank, Kotak Bank, ICICI Bank, and HDFC Bank the biggest of the sector laggards.
This heist extends a rout that already erased an estimated ₹8 lakh crore from Indian bank valuations since the conflict in the Middle East escalated.
Bloomberg has already warned that this rout may deepen further on macro risks.
So why is this happening? Analysts note that three things are happening at once, and bank stocks are caught in the crossfire.
First, there’s the RBI’s crackdown on rupee speculation. On April 2, the RBI tightened rules on foreign exchange trading, forcing banks to settle rupee contracts in the open market instead of directly with corporate clients. Jefferies explicitly warned that this might have adverse effects on banks, potentially resulting in increased losses.
Second, bond yields have blown past the 7 per cent mark. The 10-year government bond yield has hardened to 7.04–7.05 per cent, the highest since June 2024. Indian banks hold massive portfolios of government securities, so when bond prices fall (yields rise), their profits take the hit.
The RBI’s MPC statement yesterday noted this, linking it to global yields rising on inflation fears and the Middle East conflict.
Third is the direct effect of the Iran war. Businesses hit by energy costs, and consumers spending less, all add to the pressure on lenders. The market is also bracing for Friday’s US CPI data. If the data is positive, it could push back the US Fed’s rate-cut calendar, strengthen the dollar further, weaken the rupee, and put more pressure on the RBI. This chain reaction could add to the troubles of the Indian bank stocks.
Sensex, Nifty slump on April 9
The BSE benchmark Sensex shed 931 points to close at 76,631.65, and the NSE Nifty 50 settled at 23,775.10, down 222 points on Thursday. Indigo was the biggest loser of the 30 pack, down 3.65 per cent.
L&T and Eternal were the other laggards, followed by four banks—HDFC Bank, Kotak Bank, ICICI Bank, and SBI, all down by around 2 per cent each.
