Bank stocks gained today, pushing the Nifty Bank index toward its all-time high level. Read on to know what factors are pushing bank stocks higher
Bank stocks traded higher on April 17, taking the Nifty Bank index near its all-time high. The index jumped as much as 1,289.45 points, or 2.42 per cent during the latter half of today’s session to hit an intraday high of 54,407.20, just shy of some 60 odd points from breaching its previous record high of 54,467.35. It closed at 54,290.20, up with gains of 1,172.45 points, or 2.21 per cent. In the previous four sessions, the index gained around 6.5 per cent.
The rally in the bank index was led by heavyweight ICICI Bank, which jumped around 3.62 per cent, followed by Kotak Mahindra Bank, which gained 2.95 per cent. State Bank of India (SBI) and Axis Bank surged between 2.5 per cent to 3 per cent.
HDFC Bank, India’s largest lender by market capitalisation, too rose nearly 1.5 per cent. Both HDFC Bank and ICICI Bank touched their new all-tie highs ahead of their March quarter earnings release, scheduled on Saturday, April 19, 2025.
All other bank stocks, including Canara Bank, AU Small Finance Bank, Bank of Baroda, IndusInd Bank, Punjab National Bank and Federal Bank ended the day in green, except IDFC First Bank, which declined 0.54 per cent.
Shrikant Chouhan, Head Equity Research, Kotak Securities told Outlook Money: “Banking stocks have been witnessing renewed investor interest and a strong upward momentum, driven by multiple supportive factors. The sector is currently well-positioned, with asset quality at leading banks faring better than expected. Additionally, the RBI’s supportive stance on system liquidity is aiding the momentum. The domestic-centric lending model of Indian banks also provides resilience in the face of global trade uncertainties.”
Chouhan also noted that valuations in bank stocks remain attractive, adding further tailwinds to the rally. He added. “Early warning indicators suggest that the stress in the microfinance segment is easing, which is boosting confidence around overall asset quality. Moreover, top banks, which traditionally have high FII ownership, had seen significant pressure during periods of foreign outflows. With FII inflows now returning, these banks are also seeing renewed support.”
Chouhan further said, “An additional tailwind is the recent fall in bond yields, driven by controlled inflation and the beginning of a rate cut cycle. This trend is expected to boost treasury gains for banks, further strengthening their earnings outlook. All these factors collectively are driving the strong rally in the banking index.”
According to Satish Chandra Aluri, Lemon Markets Desk, "The recent rally in bank stocks is driven by rising expectations of Reserve Bank of India (RBI) rate cuts, an improving outlook for net interest margins (NIMs), and stable asset quality. The drop in retail inflation to a five-year low, coupled with forecasts of above-average monsoon rains, has strengthened the case for further rate cuts by the RBI. Softer inflation, improving system liquidity, and overall macro stability give the central bank more room to support growth — which could, in turn, boost credit demand and aid loan growth, a key earnings driver for banks.”
Vinod Nair, Head of Research, Geojit Investments, said the rally in bank stocks were also driven by expectations of improved margins stemming from changes in savings deposit interest rates.
Major banks reduced their lending and deposit rates following the RBI's move to cut the repo rate by 25 basis points (bps) to 6.25 per cent.
State Bank of India (SBI) and Bank of India reduced their fixed deposit interest rates following RBI's move. SBI and Bank of Maharashtra also reduced their Repo Linked Lending Rate (RLLR) by 25 bps to 8.25 per cent and 8.65 per cent, respectively.
HDFC Bank too lowered its interest rate on savings accounts by 25 basis points to 2.75, per cent, which is the lowest among its private sector peers. Similarly, ICICI Bank also revised its interest and lending rates downward, slashing savings account interest rates by 25 bps and reducing fixed deposit rates by up to 50 bps.
Aluri of Lemon Markets said, reduced savings deposit rates are expected to lift NIMs and boost profitability expectations of banks. He added, “Banking stocks currently offer a more attractive risk-reward trade-off, given their strong fundamentals, still-reasonable valuations, and clearer growth visibility.”
“Private sector lenders are leading the charge ahead of earnings, with investor focus on CASA trends for large banks and total deposit momentum for mid- and small-sized banks — both critical to sustaining credit growth,” he added further.
Bajaj Broking Research noted that Nifty Bank recently broke out of a falling channel that had contained the entire decline, and managed to retrace five months of losses in just two months—a sign of strong momentum. Based on this strength, the firm expects the bank index to move towards the 54,800–55,000 range in the coming weeks.