YES Bank, BOI, BoM, Union Bank, PNB, RBL Bank: Why bank stocks fell today

Banking stocks, especially the PSU ones, took a beating on Monday, falling up to 6 per cent amid rising probability of rate hikes ahead. Fears of rising bond yields weighing on treasury income also hurt the sentiment.

Nomura said the RBI monetary policy stands at a critical juncture, adding that India has so far sidestepped the rate hikes seen in other Asian economies, but higher oil prices, a surge in food prices and Fed rate hikes have brought the RBI's monetary policy to an inflection point.

"Markets are currently pricing close to 125 bps of rate hikes over the next one year," it said.

This is at a time when deficient rains hint at an increased likelihood of lower kharif (summer) and rabi (winter) crop output, which are seen weighing on rural consumption.

For the day, Nifty Bank fell 1,109 points or 1.99 per cent to settle at 54,471.65. The BSE PSU Bank fell 153 points or 3.25 per cent to 4530.72

Among PSU names, Bank of India declined 5.44 per cent to Rs 130.45. Bank of Maharashtra, Union Bank of India, Punjab National Bank, Canara Bank and State Bank of India fell 2.10-4.66 per cent.

Private lender YES Bank Ltd fell 6.18 per cent to Rs 21.18. This stock also declined as foreign brokerage Citi placed the private lender on a 'negative watch' as it assesses the impact of large FCNR(B)-linked inflows on lenders' earnings.

HDFC Bank slid 2.3 per cent. ICICI Bank, RBL Bank and AU Small Finance Bank declined up to 2 per cent.

Siddhartha Khemka,  Head of Research for Wealth Management at Motilal Oswal Financial Services said Nifty PSU Bank declined 3.24 amid concerns over a potential rate hike in the October RBI policy meeting as inflation risks remain elevated. He noted that the 10-year Indian government bond yield rose to 7.12 per cent, its highest level since May 2026, while the US 10-year Treasury yield climbed to around 5.21 per cent, further tightening financial conditions.

Meanwhile, the fall had also to do with weakness in the technical charts.

What's ahead?
Vatsal Bhuva, Technical Analyst at LKP Securities said Nifty Bank closed the day with a long bearish candlestick on the daily chart, slipping decisively below its 100-SMA on the weekly chart. This indicated continued weakness in the trend.

"However, RSI has entered the oversold zone, which may trigger a short-term bounce in the follow-up sessions. Such a recovery should be viewed as an oversold bounce rather than a trend reversal. Hence, index traders may adopt a sell-on-rise strategy. The immediate support is placed at 54,000, while 55,200 remains a crucial resistance level to watch," he said.

Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities said Nifty Bank continued to trade below its key short and long-term moving averages, reflecting a firmly bearish trend. Momentum indicators also remained weak, with the daily RSI slipping to 30.22, its lowest reading since April 2026, suggesting strong downside momentum.

"Going forward, the zone of 55,000-55,100 on the index is likely to act as an immediate resistance area. As long as Bank Nifty remains below the 551,00 mark, the bearish bias is expected to persist. In such a scenario, the index may continue its downward trajectory towards 53900, followed by the 53,400 level in the short term," Shah said.