Banking stocks faced significant selling pressure on Monday, with the Bank Nifty index dropping over 2% early in the trading session due to the Reserve Bank of India’s recent actions to bolster the rupee. All components of the Bank Nifty showed declines, signaling widespread weakness in the banking sector. The index fell by 2.65%, or 1,386.45 points, reaching 50,888.15, hitting a low around 10:45 a.m.
AU Small Finance Bank, Axis Bank, Kotak Mahindra Bank, and IDFC First Bank all saw declines ranging from 4.17% to 4.25%. IndusInd Bank, Bank of Baroda, Yes Bank, and Canara Bank also experienced drops between 3.51% and 3.79%. Additionally, Federal Bank, HDFC Bank, and ICICI Bank traded lower by up to 3%. The Nifty Financial Services index also fell by 2.41%, or 587.75 points, to 23,785.45.
Notably, the Nifty PSU Bank index decreased by nearly 3%, while the Nifty Private Bank index also saw a 3% decline. Many banking stocks, including SBI, Bank of Baroda, Canara Bank, Union Bank, and Axis Bank, were trading with losses of up to 4%. The RBI’s directive on March 27 instructed banks to limit their net open rupee positions in the foreign exchange market to $100 million daily by April 10, 2026.
The central bank emphasized that banks must maintain their NOP-INR positions within $100 million at the end of each business day. Previously, banks could offset positions across various markets, but the new directive imposes a stricter cap, particularly in the onshore market. Market participants anticipate a potential unwinding of dollar positions, leading banks to sell dollars in the short term, which could provide some support to the rupee. Despite this, the directive had a negative impact on banking stocks, causing sectoral indices to underperform in the market.
