Bank Nifty Smashes All-Time High: Banking Stocks Rally 10,000 Points from March Lows

Indian banking stocks delivered a Diwali gift to investors on Friday, October 17, 2025, as the Bank Nifty index smashed through its previous all-time high to reach 57,651.30 during intraday trading. The milestone comes at a perfect time—just ahead of the festive season and key earnings announcements from banking heavyweights.

The banking index closed the session at 57,713.35, up 290.80 points or 0.51% from the previous day, surpassing its earlier record of 57,628.40 set on July 2, 2025. This achievement is even more impressive considering that the index has rallied nearly 10,000 points from its March 11 low of 47,702—a staggering recovery that underscores the resilience of India’s banking sector.

The Rally That Rewrote Records

Bank Nifty’s performance has been nothing short of spectacular in recent weeks. The index has risen in 12 out of the last 14 trading sessions, accumulating more than 3,000 points in October alone. This translates to over a 5% rise month-to-date, positioning October as the third-best month of 2025 after March and April.

What makes this rally particularly noteworthy is Bank Nifty’s outperformance compared to the broader market. While the banking index is up over 13% so far in 2025, the headline Nifty 50 has gained less than 9% during the same period. Meanwhile, the broader Sensex closed at 83,952.19, up 484.53 points or 0.58%, while the Nifty 50 settled at 25,709.85, up 124.55 points or 0.49%.

Who Led the Charge?

The rally was broad-based, with both private and public sector banks contributing to the surge. Among individual stocks, Canara Bank emerged as the star performer, registering an impressive 52% gain from the March 2025 lows. This state-owned lender has become the poster child of the banking sector’s revival.

Other significant contributors include:

• AU Small Finance Bank: Up 46%
• Punjab National Bank and Bank of Baroda: Both rising 30%
• IDFC First Bank: Up 28%
• State Bank of India: Up 22%
• Federal Bank, HDFC Bank, and ICICI Bank: Each advancing between 17% and 18%
• Kotak Mahindra Bank: Contributing with a 15% gain

The only outlier in this stellar performance was IndusInd Bank, which declined 17% from its March low, highlighting that not all banks benefited equally from the sectoral tailwinds.

What’s Driving the Banking Boom?

Several factors have converged to fuel this remarkable rally in banking stocks:

1. Strong Q2 Business Performance

Most banking constituents reported double-digit year-on-year growth in both advances (loans) and deposits for the September quarter. This robust business performance reflects healthy credit demand and improving deposit mobilization, two key indicators of banking sector health.

2. Technical Breakout

The index breached key technical resistance levels, triggering fresh momentum buying from both domestic and foreign institutional investors. After months of selling, foreign portfolio investors (FPIs) turned net buyers in October, pumping over Rs 997 crore on October 16 alone and Rs 417 crore on October 17. Domestic institutional investors (DIIs) continued their buying spree, purchasing stocks worth Rs 4,076 crore on October 16 and Rs 1,552 crore on October 17.

3. Anticipation of Strong Q2 Earnings

Market participants are entering the Q2 results season with measured expectations, creating potential upside if results surprise positively. HDFC Bank and ICICI Bank, the two heavyweights in the banking sector, are scheduled to announce their Q2 earnings on Saturday, October 18, 2025.

Analysts project that HDFC Bank may report net profit growth in the range of 1% to 9% year-on-year, with Net Interest Income (NII) expected to grow 3% to 6%. For ICICI Bank, consensus estimates peg profit growth at around 4% year-on-year, with NII rising approximately 6-7% over Q2FY25.

4. Easing Financial Conditions

The Reserve Bank of India (RBI) has already eased policy rates by 100 basis points in 2025, and the market anticipates another rate cut later this year. According to Goldman Sachs, typical transmission lags mean credit growth is expected to recover from the second half of FY26.

The brokerage notes: “With several capital-easing measures taking effect in 2027 and proposed materially easier offshore borrowing norms, total private sector credit growth could be further supported over the next two years.”

5. Recent GST Cuts Supporting Retail Business

The government’s recent GST rate cuts on high-ticket durables, small cars, two-wheelers, and tractors are expected to boost retail consumption, indirectly benefiting banks through increased retail lending.

Market Breadth and Broader Performance

While banking stocks stole the show, the broader market showed mixed signals. On October 17, market breadth was negative, with 2,318 shares declining against 1,658 advancing. The Nifty Midcap 100 and Smallcap 100 indices fell 0.57% and 0.05%, respectively, indicating that the rally was concentrated in large-cap banking stocks rather than being broad-based.

Sectoral performance was also divergent. While the Nifty FMCG index gained 1.37% and the Auto index rose 0.66%, the IT sector faced pressure, with Nifty IT and Media indices slipping 1.63% and 1.56%, respectively. This divergence was partly attributed to margin concerns following Infosys and Wipro’s Q2 results announced on October 16.

Among Sensex constituents on October 17, Asian Paints, Mahindra & Mahindra, Bharti Airtel, and Hindustan Unilever were the top gainers, while Infosys, HCL Tech, and Tata Steel were among the laggards.

What Analysts Are Saying

Market experts are optimistic about the banking sector’s continued outperformance. Goldman Sachs expects Bank Nifty to continue outperforming both the broader market and the Nifty in the near term, citing easing financial conditions and regulatory support to boost credit flow.

Santanu Sengupta of Goldman Sachs noted: “Consensus expectations are low heading into 2Q results, with EPS growth expected to decelerate to 1% YoY in financials and -3% YoY in banks—the slowest since Covid—creating a low bar to beat.”

The analyst further added: “Domestic funds remain under-exposed to financials, while foreign investors have sold off $9 billion since last year. With strong consensus growth expectations of 15% in CY26E and mid-cycle valuations at 17x, financials look attractive at a 1.1x PEG ratio (versus MSCI India at 1.5x). With financials trading at a 22% discount to the MSCI India index (-1.5 SD), the current risk-reward appears favorable.”

The IT Sector Contrast

While banking stocks celebrated, the IT sector painted a different picture. The Nifty IT index fell 1.63% on October 17, making it the worst-performing major sectoral index. Year-to-date, Nifty IT remains down about 19%, in stark contrast to Bank Nifty’s 13% gains.

This divergence was amplified by the Q2 results of IT majors announced on October 16. Infosys reported a 13.2% year-on-year rise in net profit to Rs 7,364 crore, with revenue growing 8.6% to Rs 44,490 crore. The company revised its FY26 revenue guidance upward to 2-3% from 1-3%, reflecting cautious optimism. However, the company also announced an Rs 18,000 crore share buyback, which some analysts interpreted as a sign of limited growth opportunities.

Infosys CEO Salil Parekh said: “We have now delivered two consecutive quarters of strong growth, demonstrating our unique market positioning and client relevance. Strong deal wins, with 67% net new in Q2, reflect our deep understanding of clients’ priorities to deliver value from AI.”

Despite the positive results, Infosys shares fell 2.08% on October 17, closing at Rs 1,438, as investors remained concerned about margin pressures and the impact of H-1B visa policy changes on onsite costs.

What to Watch Next

As the markets head into the weekend, several key developments are on investors’ radar:

• HDFC Bank and ICICI Bank Q2 Results (October 18, 2025): These are the most anticipated earnings announcements, as both banks carry significant weight in the Bank Nifty index. Any positive surprise could propel the index to new highs, while disappointments could trigger profit booking.

• Reliance Industries Q2 Earnings: The conglomerate announced its results on October 17 evening. Mukesh Ambani-led RIL reported a 10% rise in net profit to Rs 18,165 crore, with revenue advancing 10% to Rs 2,58,898 crore.

• FII and DII Activity: After turning net buyers in early October, foreign investors’ continued participation will be crucial to sustaining the rally. On October 17, FIIs bought Rs 417 crore worth of equities, while DIIs purchased Rs 1,552 crore.

• RBI’s Next Monetary Policy Decision: With another rate cut anticipated later this year, the timing and magnitude of the RBI’s move could significantly impact banking stocks.

• Credit Growth Data: September quarter credit growth numbers from major banks will provide insights into the sector’s business momentum.

• Technical Levels: For Bank Nifty, key resistance levels to watch are at 58,000 and 58,500, while support is placed around 57,000 and 56,500.

• Global Cues: With crude oil prices falling to around $57 per barrel and the US Federal Reserve signaling potential rate cuts, global macroeconomic conditions appear favorable for emerging markets like India.

The Retail Investor Perspective

For beginner-to-intermediate retail investors, the banking sector’s performance offers both opportunities and cautionary tales. The 52% gain in Canara Bank from March lows demonstrates the potential rewards of investing in quality banking stocks during market corrections. However, IndusInd Bank’s 17% decline serves as a reminder that not all banks perform equally, and thorough research is essential.

The banking sector’s strong fundamentals—healthy credit growth, improving asset quality, and regulatory support—make it an attractive long-term investment theme. However, investors should be mindful of valuations and avoid chasing stocks after sharp rallies.

Diversification remains key. While banking stocks have outperformed in 2025, the IT sector’s struggles highlight the importance of maintaining exposure across different sectors to manage risk effectively.

Looking Ahead: Is the Party Just Beginning?

With Bank Nifty hitting fresh record highs and the broader market approaching its all-time peaks, the question on everyone’s mind is: Can this rally continue?

Several factors suggest that the uptrend may have more legs:

1. Earnings Support: If Q2 results from major banks meet or exceed expectations, it could provide further validation for the current valuations.

2. Festive Season Demand: The upcoming Diwali festival typically sees increased consumer spending and borrowing, which should boost banking sector performance.

3. Government Policy Support: The government’s focus on infrastructure development and the Production-Linked Incentive (PLI) schemes should drive credit demand.

4. Attractive Valuations: Despite the recent rally, banking stocks are still trading at reasonable valuations compared to their historical averages.

However, risks remain. Global economic uncertainties, particularly relating to US-China trade tensions and the health of regional banks in developed markets, could trigger volatility. Additionally, if inflation surprises on the upside, the RBI may pause its rate-cutting cycle, which could dampen sentiment.

For now, though, Indian banking stocks are basking in the spotlight, delivering one of the most impressive sector rallies of 2025. As investors await the crucial earnings announcements from HDFC Bank and ICICI Bank, the mood on Dalal Street is decidedly festive—a fitting prelude to the Diwali celebrations ahead.

The coming weeks will be crucial in determining whether this rally marks the beginning of a sustained bull run in banking stocks or simply a temporary pause before the next leg of consolidation. Either way, October 17, 2025, will be remembered as the day Bank Nifty finally broke free from its consolidation phase and embarked on a journey to new heights.

Disclaimer: This article is only for information purposes and is not investment advice. Before investing, do your own research.