Nifty Bank slides 1% to 57,158 points as Axis Bank, IndusInd Bank lead banking stocks lower

A sharp rise in global crude oil prices set the tone for banking stocks on Tuesday, August 11, with the Nifty Bank index giving up early gains to touch a session low before settling around 1 percent weaker. The move mirrored the wider caution across equities, as traders weighed the fallout from renewed friction between the United States and Iran alongside a stalled round of West Asia talks.

By the time the index hit its lowest point of the day, it had fallen to 57,158.10 points, well off Monday's close of 57,686.95 points. The index later trimmed some of that decline to trade 0.87 percent lower at 57,186.85 points, but banking counters stayed under visible pressure through the session.

Crude Oil Prices, Iran-US Tensions Drive the Selloff

Oil prices climbing past 88 dollars a barrel proved to be the bigger trigger for Tuesday's move, feeding into concerns over inflation and input costs across the broader economy. The spike came as talks in West Asia appeared to have stalled, with little clarity on when negotiations might resume. Matters were complicated further by reports that US President Donald Trump had said Washington would seek compensation from Iran for casualties from the recent conflict, a claim that followed Iran's own demand days earlier that the United States pay for damages caused during the five-month standoff between the two countries.

How Individual Banking Stocks Moved

The pullback was fairly broad-based, though the extent of the damage varied across names. AU Small Finance Bank bore the brunt of the selling, down 1.84 percent to Rs 1,049, even though the stock continues to hold a 5 percent gain for the year so far. Federal Bank and IndusInd Bank both lost 1.71 percent, settling at Rs 352 and Rs 1,010 respectively. Federal Bank remains comfortably in the green for 2026 with a 32 percent year-to-date gain, while IndusInd Bank is up 13.5 percent over the same period.

Bank of Baroda shed 1.69 percent to close at Rs 247, adding to a year-to-date decline that now stands at 18 percent. Axis Bank fell 1.53 percent to Rs 1,231, taking its 2026 losses to 3.3 percent, while Kotak Mahindra Bank eased 1.18 percent to Rs 390, down 12 percent on a year-to-date basis.

Among the relatively smaller decliners, IDFC First Bank slipped 1.04 percent to Rs 84.56, State Bank of India was down 1 percent at Rs 1,067, and ICICI Bank fell 0.74 percent to Rs 1,423. HDFC Bank recorded the smallest single-day drop among the pack at 0.60 percent, closing at Rs 727.95, though it continues to carry the steepest year-to-date loss in the group at 26.5 percent.

What are experts saying?

The day's price action sits somewhat at odds with the underlying earnings picture noted by analyst in a recent sector note from Kotak Neo Research. The report pointed to healthy earnings growth of around 14 percent year on year for banks in the latest quarter, driven largely by lower provisions even as operating profit growth stayed flat.

Net Interest Income growth came in at a steady 11 percent year on year, with public sector banks reporting roughly 10 percent earnings growth against about 15 percent for private banks. Margin trends diverged sharply between the two groups, with public banks holding broadly stable to improved Net Interest Margins while several private lenders, Axis Bank and HDFC Bank among them, saw declines that were steeper than expected.

Loan growth held firm across both public and private banks through the quarter, and the report described asset quality across retail, SME and corporate books as benign, with lenders expressing confidence in that stability even against a backdrop of geopolitical uncertainty. On margins specifically, the report argued that the sector is likely near a cyclical low point, with pressure expected to ease as banks lean more on incremental FCNR and retail deposits in place of costlier wholesale funding, and as credit growth cools from its current elevated pace.

In terms of stock preferences, the report favoured frontline private lenders, naming HDFC Bank and ICICI Bank, alongside State Bank of India on the public sector side. It noted that HDFC Bank's valuation is currently functioning as something of an anchor for the sector as a whole. Small finance banks also drew a positive mention, with credit quality among lower-income and micro-credit borrowers showing signs of recovery, and Equitas named as the report's preferred pick in that category. On the flip side, it flagged that regional banks look expensively valued given how concentrated their loan books are in gold loans, while mid-tier private banks were seen as lacking the return on equity profile needed to justify further re-rating.

Nifty Bank's Longer-Term Track Record

Zooming out from Tuesday's move, the Nifty Bank index has still delivered strong returns over longer horizons, up more than 59 percent over five years and around 29 percent over three years, alongside a more modest 3 percent gain over the trailing one-year period. The picture looks weaker in the shorter term, with the index down 4 percent year to date and 1.4 percent over the past month, while the last five trading sessions alone have shaved off 1.2 percent.

Despite the recent softness, the index has still managed to stay ahead of the broader market on a one-year basis, outperforming the Nifty 50, which posted a loss of 0.47 percent over the same stretch.

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