Banking stocks fell ahead of the RBI policy decision amid rate uncertainty.
Investors await RBI commentary on inflation, liquidity and future interest rate outlook.
Federal Bank, Axis Bank and HDFC Bank led losses in the Nifty Bank index.
Banking stocks remained under pressure on Tuesday as investors turned cautious ahead of the Reserve Bank of India's (RBI) monetary policy announcement, with concerns over persistent inflation, geopolitical tensions in West Asia and uncertainty over the central bank's policy stance weighing on sentiment.
The Nifty Bank index fell as much as 1.3% to an intraday low of 57,487.05, reflecting broad-based selling across banking shares. Investors largely expect the RBI to keep interest rates unchanged but remain focused on whether the Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, adopts a more hawkish tone to address inflationary risks.
1 August 2026
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Federal Bank emerged as the biggest laggard, declining more than 3%. Axis Bank fell over 1.5%, while AU Small Finance Bank, HDFC Bank, State Bank of India (SBI), ICICI Bank and IndusInd Bank lost between 0.5% and 1.5%. In contrast, Canara Bank, Bank of Baroda and Punjab National Bank traded in the green, outperforming the broader banking sector.
RBI Policy Decision In Focus
The RBI is scheduled to announce its monetary policy decision on August 5 at 10 am, followed by Governor Sanjay Malhotra's press conference at 12 pm.
The central bank's fourth policy meeting of 2026 comes against the backdrop of escalating tensions in West Asia and rising inflation. Retail inflation accelerated to 4.38% in June, moving above the RBI's medium-term target of 4%, increasing uncertainty over the future path of interest rates.
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At its previous policy meeting in June, the MPC kept the repo rate unchanged at 5.25%. While economists widely expect another status quo this week, markets are closely watching the policy statement and commentary for clues on the outlook for inflation, liquidity and future rate action.
According to a Reuters poll, 68 of the 72 economists surveyed expect the RBI to leave the repo rate unchanged at this week's meeting.
However, economists believe the central bank could adopt a more hawkish tone if inflation remains above target or geopolitical tensions continue to pose risks to commodity prices and the broader economy.
