Indian benchmark equity indices closed lower on Monday as BSE Sensex crashed 443 points or 0.57% to close at 77,708, while NSE Nifty50 settled down 95 points or 0.39% at 24,238.50. However, the Bank Nifty index witnessed extreme selling pressure, crashing by at least 988.3 points to hit an intraday low of 57,533.10, before closing down 576.40 points or 1% at 57,945. Despite both indices recovering from their intraday lows, selling pressure in private financial stocks kept the benchmarks in negative territory throughout the session. The market's weakness was largely driven by heavy selling in private banking stocks, which dragged the broader financial sector lower, with the Nifty Bank index emerging as the worst-performing sectoral gauge, declining more than 1%. Weak global sentiment, elevated crude oil prices, and concerns over shrinking lending margins in the banking sector also kept investors cautious throughout the trading session. Rising crude oil prices, which surged above $90 per barrel amid Middle East tensions, dampened investor sentiment and dragged the Nifty below the 24,200 mark at the opening bell. However, a "mediation" comment from Iran helped the benchmarks trim losses and allow the Nifty to hold above the 24,200 level by the close. Market breadth favoured advances, with the advance-decline ratio ending at 1:1, indicating selective buying in certain sectors despite overall weakness.
The sell-off was led by private sector banks, with HDFC Bank tumbling over 5% after reporting a net interest margin of 3.2% — perhaps its lowest ever — compressing 12 basis points sequentially. According to the bank's management, around ₹40,000-50,000 crore of borrowings are expected to mature over the next two years, creating an opportunity to optimise funding costs. Axis Bank led the losses, falling 5.5% after its NIM compressed 16 bps sequentially to 3.46%, with the contraction driven by a 3-bps impact from interest income reversals, a 4-bps impact from changes in the balance sheet mix, and a 9-bps impact from loan repricing. Yes Bank plunged by nearly 3%, while Kotak Mahindra Bank slipped 2%. The weakness spilled over to the broader financial space, with the Nifty Private Bank and Nifty Financial Services indices ending among the biggest losers of the day. The Nifty Private Bank index nosedived by 646.75 points or 2.3% to close at 27,861.75, becoming the top loser of the day. Support from ICICI Bank and Bharti Airtel helped the Nifty recover from its intraday lows, demonstrating the divergent performance within the banking sector. Ponmudi R from Enrich Money noted that "HDFC Bank declining sharply after reporting weaker-than-expected net interest margins, dragging the banking index lower and weighing on broader market sentiment." The banking sector weakness comes even as Q1 earnings from other lenders showed mixed results, with Sudeep Shah from SBI Securities noting that "HDFC Bank, Axis and Kotak are the top three losers in Nifty at the current juncture."
Despite the weakness in frontline indices, the Nifty PSU Bank index surged by 275 points or 2.8% to close at 8,615.10, emerging as the best performer of the day. Punjab National Bank shares skyrocketed nearly 6%, followed by Union Bank of India which gained 4.4%, Indian Overseas Bank soared 3.6%, Bank of Baroda rallied over 3%, while Canara Bank and Indian Bank advanced by 2.95% and 2.89% respectively. Buying also emerged in other banking stocks like Bank of India, UCO Bank, SBI and Central Bank of India, which zoomed by 1% to 2%. The Nifty PSU Bank index gained 3% following PNB's strong results, lifting most public sector lenders. Punjab National Bank reported a healthy Q1FY27 with PAT rising 214% YoY, driven by improving core operating performance and continued strengthening in asset quality. Buying also emerged in power stocks, with JSW Energy and Torrent Power rising 3-5%, while elevated crude oil prices supported upstream oil companies including Oil India and ONGC. The broader market outperformed the benchmark indices, with mid-cap stocks posting gains, indicating that selling remained concentrated in large-cap private banking counters rather than the wider market.
The market decline was primarily driven by disappointing Q1 results from major private banks announced during the weekend. HDFC Bank delivered a mixed quarter with core PPOP growth of +8%/-1% YoY/QoQ (4% below JMFe), due to lower fee income and continued NIM compression. ICICI Bank delivered a strong 1QFY27 performance with PAT growth of 16% YoY/8% QoQ (+5% JMFe) and RoA/RoE increasing 6bps/55bps QoQ to ~2.5%/17.1% driven by healthy NII growth, strong fee income growth and lower-than-expected provisions. Axis Bank reported a mixed Q1FY27, with healthy balance-sheet growth offset by continued margin pressure. Kotak Bank reported a mixed Q1FY27 performance, with PAT growing 26% YoY/2% QoQ (-2% JMFe), supported by normalisation in credit costs while operating performance remains underwhelming. Yes Bank reported a 2% PAT beat versus JMFe (34% YoY/flat QoQ), primarily driven by improving core profitability and lower tax expenses, partly offset by higher-than-expected provisions (49% JMFe). Federal Bank reported a healthy Q1FY27 with PAT rising +37% YoY, +2% JMFe, aided by stronger-than-expected NII and sharply lower provisions. VK Vijayakumar from Geojit Investments noted that "Among the banking majors, ICICI Bank has reported stellar set of numbers with excellent all round performance. Kotak Bank, too, has reported very good results. HDFC Bank has disappointed, particularly on the NIM front."
Despite the benchmark indices closing lower, the Nifty Midcap index gained 374 points to 62,802, significantly outperforming the broader market. Oriental Hotels surged 12%, while Jana Small Finance Bank extended its gaining streak and is now up 14% this month. Sansera Engineering and Craftsman Automation gained 3% each following a positive brokerage note. From the Sensex basket, Trent Ltd, Power Grid Corporation of India Ltd, Bharti Airtel Ltd, Cipla Ltd, NTPC Ltd and State Bank of India were the major gainers. Axis Bank Ltd, HDFC Bank Ltd, Maruti Suzuki India Ltd, Kotak Mahindra Bank Ltd, Jio Financial Services Ltd and Infosys Ltd were the biggest laggards. The divergent performance highlights that selling remained concentrated in large-cap private banking counters rather than the wider market, with institutional flows showing mixed patterns during the session. Nifty Midcap 100 gained 0.60% and Smallcap 100 rose 0.16%, with the BSE advance-decline ratio at 1.10, indicating that broader markets held up better than headline indices.
