Bank Nifty crashes over 3%, PSU banks lead the losses: When is a good time to buy financial stocks? Check what analysts say

Bank Nifty crashes over 3%, PSU banks lead the losses: When is a good time to buy financial stocks? Check what analysts say

• Bank Nifty index fell over 3% amid crude price and FPI concerns
• PSU banks led losses; HDFC Bank fell after chairman quit
• Foreign investors sold $9.57 billion in Indian equities in March

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The Bank Nifty index crashed over 3% on March 23 on fears that higher crude prices could lift borrowing costs, push bond yields up and compress treasury gains.

At 12:10 pm on March 23, Bank Nifty index was trading 3.2% lower at 51,968.75 with PSU banks like Union Bank of India, Canara Bank and Punjab National Bank leading the losses by falling 4.3%-4.7%. The sectoral index fell nearly 16% in the last one month.

Among stocks, HDFC Bank, India's largest private lender and the heaviest-weighted stock in the benchmarks, fell about 2.5% after sliding 7.4% in two sessions following the abrupt resignation of part-time chairman Atanu Chakraborty.

Shares of State Bank of India fell 3% after the lender got a Rs 6,337-crore tax demand from the Income Tax Department for the assessment year 2024.

Oil prices swung between gains and losses on Monday as investors weighed rising US and Iranian threats over energy facilities against the release of millions of barrels of seaborne Iranian oil after Washington temporarily removed sanctions.

Brent crude futures rose 65 cents to $112.84 a barrel by 0446 GMT. US West Texas Intermediate was at $98.75 a barrel, up 84 cents. Both contracts were down more than $1 earlier in the session.

The spread of more than $13 a barrel between Brent and WTI is the widest in years.

Elevated crude oil prices and relentless foreign outflows from domestic markets put the rupee under pressure, which weakened to a record low on Monday, eclipsing its previous low hit on Friday.

Foreign portfolio investors have sold $9.57 billion worth of Indian equities so far in March, on track for the heaviest monthly outflows since October 2024.

"The complete negative stance of the FPIs towards India is evident from the fact that they are selling recklessly without regard for valuations. For instance, during the fortnight ending March 15, FPIs sold financial services stocks for Rs 31,831 crore. Financial services are doing well and their valuations are fair. Despite this, FPIs sold massively in this sector because this sector accounts for about 32% of the Assets Under Custody of the FPIs. The sector has liquidity and it is easy to sell and exit. A reversal of the FPI selling will happen only when the war ends and normalcy returns to the market," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

When should one buy financial stocks?

"A sustained close above 54,000 could signal strengthening bullish momentum and potentially trigger a recovery. However, failure to reclaim this level may keep the index under short-term corrective pressure. Traders should remain cautious and disciplined while monitoring key levels for the next directional move," said Hitesh Tailor, Research Analyst, Choice Broking.

"Based on the data, we project the Bank Nifty to trade between 52,000 and 55,500 in the coming week, with critical inflection point at 54,000," said Axis Securities.

Indian government bonds plummeted on Monday, as surging oil prices and rising US Treasury yields weighed on sentiment.

The benchmark 6.48% 2035 bond yield was at 6.8261% as of 10:30 a.m. IST, up 9 basis points, and after closing at 6.7369% on Friday. Bond yields move inversely to prices.

Higher oil prices pose a particular risk for India, the world's third-largest crude importer, as they could heighten domestic inflation and widen the current account deficit, adding to the pressures already facing the bond market.