Bank Nifty falls over 2% as crude-driven inflation worries weigh; ICICI Bank, HDFC Bank among top Nifty losers

Bank Nifty

• Banking stocks fell as crude oil prices raised inflation concerns
• ICICI Bank, HDFC Bank, and Bajaj Finserv led sector losses
• Bank Nifty dropped over 1 percent, underperforming benchmarks

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Banking and financial stocks extended their decline into the late afternoon trade on Friday, dragging the Bank Nifty index down more than 2 percent, as elevated crude oil prices stoked concerns over inflation and the prospect of tighter monetary policy. ICICI Bank, State Bank of India, Axis Bank and HDFC Bank shares were among the top losers on the Nifty, leading the sectoral decline.

At close, the Sensex was down nearly 1,100 points or 1.4 percent at 78,919, while the Nifty fell 315 points to 24,450. Market breadth turned weak with 1,813 shares advancing against 2,217 declines.

The Nifty Bank index underperformed the benchmarks, dropping about 2.15 percent, making it one of the worst-performing sectoral indices during the session. The index lost over 1,270 points to end at 57,783 points. Both Nifty PSU Bank and Nifty Private Bank indices also fell 2 percent and 2.3 percent, respectively.

Among the top losers on the Nifty, ICICI Bank shares fell 3.1 percent. State Bank of India and Axis Bank stocks slipped 2.5 percent each, and HDFC Bank dropped 2.3 percent. Among other financial stocks, Shriram Finance declined 2.8 percent, while HDFC Life Insurance fell 2.2 percent.

• Also read | Reliance shares rise 2.5% as India gets 30-day waiver from US to purchase Russian oil

Analysts said the weakness in banking stocks reflects macro concerns arising from surging crude oil prices amid the escalation of the Middle East conflict. They said that elevated crude oil prices have reignited inflationary concerns, stoking fears of tighter monetary policies and delay in interest-rate cuts by central banks.

"Persistent geopolitical tensions in the Middle East continue to keep crude oil prices elevated, heightening concerns over renewed global inflationary pressures and the possibility of tighter monetary policy conditions ahead," said Ponmudi R, CEO of Enrich Money.

Crude prices will remain the key variable for markets in the near term, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. “As the war continues to rage and uncertainty looms large, markets will be influenced by crude prices,” he said. Although crude has risen about 16 percent since the conflict began, the increase is still modest compared with spikes seen during earlier geopolitical crises, he added.

If Brent crude remains around $85 per barrel, markets may absorb the impact, but a rise toward $90-100 could begin to pressure global equities by intensifying inflation concerns, said Vijayakumar.

Earlier today, technical analysts said the Bank Nifty charts suggest near-term volatility. According to Aakash Shah of Choice Equity Broking, 59,300-59,400 remains immediate resistance, while 58,700-58,800 was the key support band for the index.

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