Nifty Bank logs 3rd-worst March fall since the global financial crisis. HDFC Bank, SBI among top culprits

The Nifty Bank index is headed for its third-worst March performance in two decades, underscoring the intensity of the ongoing market correction, with banking stocks emerging as one of the biggest casualties. As of March 19, the index was down around 12% for the month, placing it among the steepest declines for the banking gauge, surpassed only by the pandemic-driven crash of 2020 (-34%) and the global financial crisis period in 2008 (-23%).

The 14-stock index is also among the worst-performing sectoral indices, behind only Nifty PSU Bank (-14%) and Nifty Auto (-13%). The broader Nifty 50 has also declined nearly 9% during the same period, highlighting the breadth of the selloff.

Historically, the index has largely delivered muted or modest returns in March, making the current drawdown stand out.



On Thursday, the Nifty Bank index plunged 3.4%, leading to Nifty's 776-point (3.3%) decline. Autos, IT and energy stocks also turned the day's villains as their benchmarks dropped 4.3%, 3.3% and 2%, respectively. Between them, they corner around 63% of Nifty, with a lion's share of 37.68% accounted by financials.

Bank stocks in March

The selloff in the Nifty Bank has been broad-based, with most constituents trading deep in the red in March so far. PSU lenders have taken the biggest hit, with Canara Bank, Punjab National Bank and Bank of Baroda plunging around 15% each, while Union Bank declined 14%.

PSU lender State Bank of India (SBI) is down 12%. It is the third heaviest (10.68%) in Nifty Bank in terms of weight and is a high-impact counter next to HDFC Bank and ICICI Bank.

A stock’s weight in an index determines how much its price movement influences the index’s overall movement. Most indices like the Nifty 50 or Nifty Bank are market-cap weighted, implying that larger companies have higher weights.

Among private players, IndusInd Bank has also dropped 15%, while IDFC First Bank and Axis Bank have fallen 14% and 13%, respectively.

HDFC Bank and ICICI Bank are down between 12% and 9%, exerting significant pressure on the index. They occupy the top two slots in terms of their weights in the index. They carry 19.7% and 16.1% in the banking gauge.

Tier-1 lender Kotak Mahindra Bank is down 11% in March, while mid-sized lenders like Federal Bank and Yes Bank have slipped about 11% each, while AU Small Finance Bank's share price has eroded by 5%.


Also read: Private bank stocks slump up to 21% in one month, but Gurmeet Chadha sees value. Here's why

Sectoral snapshot

The broader market selloff in March has been reflected across sectors, with sharp declines in most major indices. The Nifty PSU Bank has emerged as the worst performer, plunging 14.36%, followed by the Nifty Auto index, which has dropped 13%. The Nifty Oil & Gas index has declined 11%, while both the Nifty Financial Services and Nifty Realty indices are down 10% each.

Defensive and consumption-oriented sectors have also not been spared, with the Nifty FMCG, Nifty Metals and Nifty Consumer indices falling around 8% each. Meanwhile, the Nifty IT and Nifty Media indices have slipped 7%, while relatively defensive pockets such as the Nifty Healthcare, Nifty Pharma, and Nifty India Defence have limited losses to between 4% and 5%, indicating some resilience amid the broader risk-off sentiment.

Why are banks under pressure?

The underperformance of financials has been primarily due to the Foreign Institutional Investors' (FII) outflows in the fortnight ended March. They pulled out investments worth Rs 52,704 crore in the period, out of which Rs 31,831 crore was accounted for by financials.

Foreign ownership in Indian equities has been falling as valuations remain a concern. Global macro headwinds, including rising bond yields and delayed rate-cut expectations, have added to the worries.

The Iran-Israel war has brought a fresh wave of economic uncertainty as energy prices are rising as a fallout of the conflict. The Brent prices are hovering near the 112 a barrel mark.

Given their heavyweight in benchmark indices, the selloff in banking stocks has also amplified the broader market decline.

Also read: Lacking firepower: Down up to 11%, Iran-Israel war fails to trigger defence stocks. What’s the outlook

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