NIFTY Bank index zooms over 10% in five sessions, hits record high today; here is why

Banking shares have been witnessing strong buying interest since the last few trading sessions, and the same is reflected in the surge in the measure of banking shares.

The gauge of banking stocks on the National Stock Exchange, the NIFTY Bank index, rallied for a fifth straight session on Monday, April 21.

The index surged as much as 1,093.9 points, or 2.01%, to hit a record high of 55,384.10, powered by strong earnings posted by the country's top two private sector lenders, HDFC Bank and ICICI Bank, igniting broader buying interest for banking stocks across the board, analysts said.

In the last five trading sessions, the NIFTY Bank index has surged as much as 5,143.95 points, or 10.24%, from a closing of 50,240.15 on April 9, data from the National Stock Exchange showed.

In Monday's session all the banking shares in the NIFTY Bank index were trading higher, led by AU Small Finance Bank's 6% gain. IDFC First Bank, IndusInd Bank, Axis Bank, State Bank of India, Canara Bank, Punjab National Bank and Bank of Baroda also rose between 2% and 5%.

NIFTY Private Bank and PSU Bank indices were also trading higher with gains of 2.35% and 3% each, respectively.

Q4 earnings boost

A strong start to fourth-quarter earnings season by the country's top lenders also led to heavy buying of the banking shares.

The NIFTY Bank index, the measure of 12 stocks from the banking space, rose to a record high of 55,291.05, powered by gains in ICICI Bank and HDFC Bank.

HDFC Bank, the country's largest private sector lender, reported a net profit of ₹17,616 crore, marking an upside of 6.6%, surpassing the street estimate of ₹17,000 crore. HDFC Bank's net interest income, or the difference between interest earned and interest expended, rose 10.3% to ₹32,066 crore in the March quarter from ₹29,080 crore in the December quarter.

ICICI Bank, the country's second-largest private lender, also beat street estimates in the March quarter after it reported a net profit of ₹12,630 crore in the quarter ended March 2025, marking an increase of 18% from ₹10,707.53 crore in the same period last year.

ICICI Bank's net interest income, or the difference between interest earned and interest expended, rose 11% in the January-March period to ₹21,192.94 as against ₹19,092.80 crore in the year-ago period.

Smaller private lender YES Bank also surprised market participants in the fourth quarter after its net profit advanced 63% to ₹738 crore in the March quarter on the back of lower provisioning for bad loans and stable asset quality.

Why Banking stocks are surging

The banking shares caught investors' interest after the Reserve Bank of India (RBI) announced a repo rate cut last week in a move to support growth.

Following the rate cut by the RBI, a whole host of banks announced interest rate cuts, thereby reducing borrowing costs.

Reduction in interest rates for loans augur well for future earnings of banks as it will lead to higher demand for loans across categories like home loans, personal loans, car loans and others, analysts said.

Earlier this month, last week, global investment bank Goldman Sachs came out with a report in which it said that it sees early signs of improvement in asset quality and operating profitability, which added to the bullish sentiment for banking shares, analysts said.

"In the near term the data points could remain soft, given sluggish credit growth (see recent report), impact on NIMs due to lead/lag between loans vs. deposits and elevated credit costs, driving modest EPS cuts of 2% on average for our coverage for FY26E. We believe the sector could be closer to the bottom of the cycle, with cuts to consensus EPS forecasts for FY26-FY27E to end in 1HFY26," Goldman Sachs said in a report.

The global investment bank added that the asset quality of the banking sector is showing signs of stabilisation in most loan segments, noticeably in the unsecured loan segment, except for business banking loans for NBFCs.

"We expect the slippages to start moderating from 2HFY26, and consequently, the credit costs will also start to moderate from 2HFY26, as we lower our credit-costs assumptions," Goldman Sachs added.

Goldman Sachs further said that banks will have a manageable impact of tariffs on their earnings.

"Our macro team has reduced GDP growth assumptions by 30 bps (link to note) on potential impacts from tariff rollouts by the US government. However, they still expect nominal GDP growth of 9.5% pa in FY26/27. Our credit growth assumptions of 11% CAGR over FY25-27E look manageable, partly supported by the fiscal measures (cut in income tax rates), RBI easing measures (such as rate cuts, liquidity infusion, etc.) and likely improving asset quality scenario in 2HFY26," Goldman Sachs said.

As of 11:30 am, the NIFTY Bank index was the top sectoral gainer; the index advanced 2.01% higher to 55,382.30, outperforming the NIFTY50 index, which was up 1.13%.