The banking sector staged a strong recovery on Thursday, with Nifty Bank rising 0.71% to 57,577.15 as large private and public-sector banks rallied following record foreign-currency inflows. According to Upstox, ICICI Bank climbed 1.28% while SBI shares were trading 1.16% higher at ₹1,032.70 on the NSE. HDFC Bank gained 0.69% during early trade, with Axis Bank, Canara Bank, and Union Bank also trading over 1% higher. The rally was supported by $136.377 billion in foreign currency inflows attracted through Reserve Bank of India measures, substantially higher than market expectations. The FCNR(B) deposit programme received $127.226 billion of the total inflows, with external commercial borrowings contributing $3.89 billion and overseas foreign-currency borrowings adding $5.26 billion. The NIFTY PRIVATE Bank index was trading 1.18% higher at 27,931.95 levels, with RBL Bank emerging as the top gainer, up 3.62%, while the NIFTY PSU Bank index was trading 1.17% higher at 8,611.70, with all 12 constituents trading in the green.
The banking sector's strong performance extended beyond the major lenders, with several mid-cap banks posting significant gains. As reported by Upstox, Bank of Maharashtra gained the most, up over 4%, while Punjab & Sind Bank gained 3% to ₹23.31. Bandhan Bank advanced 2.32% to ₹165.45 and Bank of India rose 2.04% to ₹145.40. Four banks featured among the leading gainers on the BSE Midcap index, indicating broad-based strength across the banking sector. The Nifty Private Bank and Nifty PSU Bank indices also emerged among the leading sectoral gainers, with the NIFTY Bank index hitting a high of 57,661.40 during the early session.
Excluding index funds and ETFs, several banking and financial-services sector funds have sizeable exposure to the country's largest lenders. As reported by Mint, UTI Banking and Financial Services has the highest exposure to HDFC Bank at 17.28%, followed closely by SBI Banking & Financial Services at 16.97%. For ICICI Bank, Taurus Banking & Financial Services leads with 17.22% allocation, while SBI stands out among the five banks with a 26% one-year gain, making funds with sizeable SBI exposure potential positive contributors to returns.
According to data from Value Research as of July 31, 2026, the top mutual fund allocations show varied exposure across different banks. SBI Banking & Financial Services has the highest Kotak Mahindra Bank allocation at 9.68%, while UTI Banking and Financial Services leads with 8.81% exposure. For Axis Bank, UTI Banking and Financial Services appears among the funds with the highest exposure at 9.69%, followed by Sundaram Financial Services Opportunities at 9.41%. The data emphasizes how fund performance can differ significantly depending on which banks a portfolio manager owns and how much they allocate to each.
The performance data underscores the importance of examining actual portfolio composition when comparing similar category funds. As reported by Mint, two funds in the same category can take very different bets on the same banking stocks, which can materially affect their risk and returns. For retail investors, the key takeaway is to look beyond the fund name and check the actual portfolio composition when making investment decisions, as fund performance can vary significantly based on individual bank allocations and their respective market performance. The current rally, driven by RBI measures and strong foreign inflows, demonstrates how sector-specific factors can significantly impact individual bank performance and fund returns.
