Banking stocks outperformed the broader market on September 3, with Nifty Bank closing 0.36% higher at 57,380.60 despite a sharp late selloff in benchmark indices. The Sensex tumbled 417 points, or 0.55%, to 76,153 and the Nifty 50 fell 41 points to 23,873 after reversing sharply from a strong opening. According to Moneycontrol, the banking index pared much of its early gains after having risen over 1% at intraday high, but still finished in positive territory. The India VIX ended 2.54% lower at 11.33, indicating reduced market volatility. Nifty Realty emerged as the strongest sectoral performer, rising 2.58%, while Nifty Smallcap 100 gained 1.20% and Nifty IT fell 0.85%.
Banking stocks substantially outperformed the broader market throughout the session, with Nine of the 16 major sectors advancing, led by lenders who mobilised a higher-than-expected $136.38 billion through the RBI's foreign-currency deposit and borrowing schemes. The Nifty Bank index rose 1.01% to 57,753.60 in early trade, while the Nifty Private Bank index ended 0.51% higher and the Nifty PSU Bank gained 0.48%. Among individual stocks, Axis Bank emerged as the top gainer among the 30 Sensex constituents, rising 1.04% to ₹1,267, with HDFC Bank gaining 0.83% to ₹706.65. IDFC First Bank was the biggest gainer within Nifty Bank, rising 2.83% to ₹87.50, followed by IndusInd Bank, which climbed 2.74% to ₹1,004.80. Yes Bank gained 1.76% and Union Bank of India advanced 1.15%, while ICICI Bank and SBI finished with more modest gains of 0.25% and 0.24% respectively. However, gains were not uniform, with Federal Bank falling 2.48% and PNB declining 0.58%.
The sharp surge in foreign-currency inflows has significantly boosted liquidity across the banking system, with Motilal Oswal Financial Services noting that banks have garnered $136.38 billion in forex inflows under the RBI's twin swap facilities, with FCNR(B) deposits accounting for $127.23 billion. The resulting surplus liquidity of more than ₹6 trillion has pushed deposit growth to 14.7% year-on-year. According to MOFSL, the brokerage has raised its FY27 system credit growth estimate by around 150 basis points to 15.5-16%, a potential positive for banks' balance sheets and earnings. The mobilisation, which substantially exceeded earlier expectations, has boosted banking-system liquidity and strengthened India's external buffers. The FCNR(B) deposit window closed on August 31, while the facilities for ECBs and OFCBs will remain open until December 31. Among individual banks, ICICI Bank has mobilised $17.88 billion of FCNR(B) deposits, capturing 14% market share of the total FCNR(B) inflows, while SBI has garnered $9 billion and is expected to beat its $10 billion guidance. RBL Bank mobilised $3.4 billion through the facility during the period, with its international banking unit subsequently deploying $1.08 billion as loans backed by these deposits, while IDFC First Bank mobilised a gross amount of $3.57 billion from NRI customers.
The Reserve Bank of India announced the closure of its special FCNR(B) window on August 31, 2026, a month ahead of the originally scheduled September 30 deadline. As per The Hindu BusinessLine, the facility, launched on June 8, was initially scheduled to remain open until September 30 but was closed on August 31 after the central bank said its objective had been achieved ahead of schedule. The RBI mobilised a record $127.23 billion through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits as of August 31, with total inflows under the measures reaching $136.38 billion when including overseas foreign-currency borrowings (OFCB) and external commercial borrowings (ECB). FCNR(B) deposits are fixed-term deposits held in foreign currencies, with the principal and interest repaid in the same currency, shielding depositors from direct rupee exchange-rate risk. The arrangement allows non-resident Indians to place foreign-currency funds with Indian banks without taking direct rupee-currency risk, providing the RBI with a larger pool of foreign currency to manage external pressures and support liquidity in the foreign-exchange market.
Foreign Institutional Investors (FIIs) bought equities worth ₹6,688.37 crore on Wednesday, while Domestic Institutional Investors (DIIs) also purchased shares worth ₹2,812.98 crore, according to exchange data. As per The Hindu, an interesting feature of Wednesday's market decline is that the 141-point dip in Nifty happened despite ₹9,500 crore of institutional buying, with FIIs buying ₹6,688 crore and DIIs buying ₹2,812 crore. The $136.38 billion mobilisation exceeds the upper-end estimate of $100 billion, boosting liquidity ahead of the festive season and potentially helping keep interest rates lower. The RBI had introduced the special facilities in June to attract foreign currency at a time when capital outflows, rupee weakness and elevated crude oil prices were putting pressure on India's external position. The inflows also supported the rupee, which strengthened sharply against the dollar during the session, providing additional support to market sentiment. A report by Jefferies India said the flows enhance liquidity ahead of the festive season and may help keep rates lower, with better liquidity benefiting NBFCs & Small Pvt banks.
