Banking stocks take a breather after stellar rally; NIFTY Bank down 400 pts after surging 11% in 6 sessions; what you need to know

Exchange data show that the NIFTY BANK index has rallied around 10.76% over the past six sessions (from April 11 to April 22 closing), and banking stocks have been the biggest contributors to the market's sharp recovery.

In absolute terms, the banking index has rallied 5,407 points during the window.

However, on Wednesday, the index slipped as much as 484 points in the intraday deals. Last seen, the NIFTY BANK index was trading 417 points, or 0.75% lower, at 55,230.25 levels.

In the previous session, the index had settled at 55,647.20 levels.

On a year-to-date (YTD) basis, the index has rallied over 8.2%, data show.

Banking stocks have been outperformers lately, as, according to analysts, this sector is reasonably priced and has crossed an inflection point. Easier liquidity conditions, growth-friendly regulatory moves by the RBI, and rising retail lending make it an attractive area.

"These developments, combined with a broader economic push for growth, enhance the sector’s outlook. As part of a disciplined Growth At Reasonable Price (GARP) strategy, banking continues to be a key overweight sector due to its stable valuations and strong potential for continued earnings growth," notes Rahul Singh, CIO – Equities, at Tata Asset Management.

Besides this, the RBI’s revised guidelines on liquidity coverage ratio (LCR) provide another boost for banks. The central bank has eased run-off factors — the percentage of deposits expected to be withdrawn during a stress test — for various retail and non-financial deposits. This move is expected to give banks more liquidity, ease pressure, and spur further deposit rate cuts, ultimately boosting their profit margins.

Following this announcement, the BANK NIFTY hit a record high of 55,961.20 on Tuesday, April 22.

Additionally, banking stocks have been on a rising spree, as the sector is viewed by market participants and analysts as immune to the tariff uncertainty that is causing turbulence in most other sectors.

How individual stocks are performing today

On the other hand, AU Small Finance Bank was trading nearly 6% higher at ₹649.45 apiece after its Q4 results, declared last evening.