Rising interest rates have pulled down the banking indices by as much as 13 per cent since the last rate increase by the RBI.
Between July 26 and August 18, the BSE Bankex and Bank Nifty fell by 13.57 per cent and 13.61 per cent, respectively.
Analysts say that investors have been jittery ever since the last RBI policy review when the key rates were increased by 50 basis points. The increase in the interest rates has hurt the financial sector, which was considered to be one of the most robust and reliable sectors by investors and fund managers alike.
“The markets, in general, are undergoing pressure with FIIs inflows having reduced. FIIs have particularly reduced their exposure to the banking sector. Both global and domestic factors have led to this reduction,” said Ms Anita Gandhi, Whole Time Director, Arihant Capital Markets.
There have been talks of imposing financial transaction tax in France and Germany, which led to a 6 per cent drop in global stocks, said market experts. Domestically, the concerns have been over rising NPAs and rising interest rates, they added.
The RBI is expected to raise interest by 25 basis points, say experts.
The BSE Bankex fell by about 3.5 per cent on Thursday. Axis Bank was the worst performer with a decline of over 5.5 per cent. ICICI, IDBI and YES Bank fell by 5 per cent each. Bank of Baroda and SBI declined by 4.47 per cent each.