HDFC, SBI, and Canara Bank shares decline amid Bank Nifty's reversal; index falls 2%.

Banking Stocks Decline as Investors Lock in Gains

The Indian banking sector witnessed a decline in Thursday's trade, with the Nifty Bank index falling up to 2 percent. This drop is in line with the decline in benchmark indices Sensex and Nifty. All 14 constituents of the banking index were trading in the red, with the Nifty PSU bank and the private bank index also slipping up to 2 percent.

The fall comes after five consecutive sessions of gains in the index, during which it had risen about 10.5 percent, triggering profit booking by investors. This movement is more a case of profit booking, as Sunny Agrawal, Head of Fundamental Research at SBI Securities, noted that the underlying fundamentals of the banking sector remain intact.

The banking sector has rebounded significantly from recent lows of around 50,000 to nearly 56,000, prompting investors to lock in gains. The recent RBI policy decision was in line with expectations, and the change in NPA provisioning norms for capital adequacy computation is expected to enhance liquidity and support healthier credit costs. Looking at the provisional business updates, the banking sector appears well positioned to deliver 13-15 percent credit growth this quarter.

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Shares of HDFC Bank, State Bank of India, Canara Bank, and Punjab National Bank were among the major laggards, declining up to 3 percent. HDFC Bank was among the worst performers on both the banking index and the benchmark Nifty, snapping its five-day gaining streak and falling 2.8 percent to hit an intraday low of Rs 793.10 on the NSE.

Other heavyweights, including ICICI Bank, State Bank of India, Punjab National Bank, and Axis Bank, were down between 1 percent and 2 percent. Canara Bank and Yes Bank were trading lower by up to 1 percent.