The Bank Nifty surged nearly 2 per cent on Monday to surpass the 55,000 level for the first time. The gains in the index was a result of renewed buying interest by foreign portfolio investors (FPIs), improvement in quarterly results posted by large private sector lenders and the overall positive macroeconomic environment.
How much has the surged?
On Monday, the 55,304.5 on Monday. The index gained 2.15 per cent during intraday trades.
The and ICICI Bank stocks closed at record high levels of Rs 1,925.2 apiece and Rs 1,408.1 per share, respectively, on Monday.
The banking index, which consists mainly of private sector banks, had last touched a record high of 54,467.35 on September 26, 2024, when domestic markets had also surged to lifetime highs.
While the is trading 8 per cent below its record high reached on September 26, 2024, the Nifty Bank has risen 1.7 per cent over its September peak.
What are the drivers behind this rise?
The surge in the banking index was mainly driven by good quarterly performance posted by large private sector banks such as HDFC Bank and ICICI Bank, and on increased buying by overseas investors.
“Nifty Bank surged to a record high today, driven by a combination of strong earnings, supportive macro conditions, and renewed foreign investor interest. Key private banks like HDFC Bank and ICICI Bank delivered March quarter results that beat expectations across the board, with robust net interest income growth and low credit costs,” said Sonam Srivastava- Founder and Fund Manager at Wright Research PMS.
HDFC Bank reported a 6.7 per cent growth in standalone profit after tax (PAT) at Rs 17,616.14 crore, while ICICI Bank’s standalone net profit jumped 18 per cent to Rs 12,630 crore in the quarter ended March 2025.
“If you look at the banking stocks like HDFC Bank, ICICI Bank, they are at record highs as FPIs are buying them in the last three to four days. When FPIs buy, they do it in bulk,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
FPIs’ buying interest in banking stocks follows heavy selling in the first 15 days of April. Foreign investors dumped Rs 4,501 crore worth of financial services stocks between April 1 and 15, according to the National Securities Depository Ltd (NSDL) data.
Higher buying interest in banking stocks is further buoyed by the Reserve Bank of India’s (RBI) intent to maintain systemic liquidity at comfortable levels, said Rohan Mandora, Analyst, Equirus Securities.
How about the valuation?
According to Wright Research PMS’ Srivastava, from a valuation standpoint, while the Bank Nifty index has seen a strong run-up, it remains reasonably priced.
“As of mid-April, the Bank Nifty was trading around 2.3 times book value and about 14 times trailing earnings levels that are elevated but still below the five-year peaks. The sector’s return on equity remains strong, with leading banks compounding book value at high teens, which supports the case for further re-rating, she said.
While valuations have expanded in the wake of the rally, they remain meaningfully below historical peak multiples, indicating limited signs of froth, Mandora said.
What is the outlook for the banking sector?
Analysts are upbeat about the banking sector driven by robust credit growth, stable asset quality, improvement in quarterly earnings and sufficient capital buffers.
“Looking ahead, the first half of FY26 may pose challenges for banks as the transmission of a 50 basis points (bps) repo rate cut is expected in Q1, with an additional 25–50 bps cut likely over the fiscal year,” said Equirus Securities’ Mandora.
In response to repo rate cut by the RBI, banks such as HDFC Bank, ICICI Bank, and Axis have already reduced savings deposit rates by 25 bps in April 2025, while some have also cut peak term deposit rates by 5–40 bps—partially mitigating NIM compression, he said.
“From H2FY26 onward, we anticipate a more favorable environment for financials, supported by improving business momentum and macro tailwinds,” Mandora said.
