The Nifty Bank index fell more than 370 points on Monday, dragged down by broad-based selling in banking stocks. Public sector lenders led the decline, with Punjab National Bank, Axis Bank, and State Bank of India among the hardest hit, each dropping up to 2%.

The selloff was concentrated in PSU banks, which tend to be more sensitive to shifts in rate expectations and credit cycle concerns. Private sector banks also participated in the decline, suggesting the pressure was sector-wide rather than stock-specific.

What the charts say

Analysts tracking the index flagged key support and resistance levels in the wake of the drop. Technical indicators point to near-term consolidation, meaning the index is likely to trade in a range rather than trend sharply in either direction over the short term.

The next clear directional move, according to analysts, is expected to emerge from either a breakout above resistance or a breakdown below support. Until that happens, traders are being advised to watch price action around those levels closely before taking fresh positions.

This kind of technical setup, where momentum stalls after a sharp move, is common after sudden index drops. It often reflects the market waiting for a fresh catalyst, whether from macro data, policy signals, or earnings, to establish a new trend.

Why it matters

The National Stock Exchange Nifty Bank index is one of the most actively traded benchmarks in India. It tracks the twelve most liquid and large-cap banking stocks listed on the NSE, making it a reliable real-time gauge of sentiment toward the financial sector.

A 370-point drop is meaningful. Banking stocks carry significant weight in broader indices too, so a sustained decline in this sector can drag on the overall market. More importantly, banks sit at the centre of credit flow in the economy. When sentiment toward them weakens, it can signal broader concerns about loan growth, asset quality, or margin pressure, even if no single trigger is apparent from Monday's move alone.

PSU banks, which include SBI and PNB, have had a volatile 2026. They benefited earlier in the year from expectations of rate cuts and improved asset quality, but remain exposed to government policy decisions, credit demand from state-linked borrowers, and capital adequacy requirements. Any shift in those variables can produce quick, sharp moves in their stock prices.

Axis Bank, a large private sector lender, saw similar pressure, which suggests the selling was not limited to concerns unique to public sector banks. Broader risk-off sentiment or profit-taking after recent gains may have played a role, though the available information does not point to a specific trigger for Monday's move.

What to watch next: whether the Nifty Bank index holds its key support levels over the coming sessions will be the clearest signal of whether this is a brief pullback or the start of a more sustained correction. A clean break above resistance, on the other hand, would suggest buyers are returning with conviction. Macro signals, including any guidance from the Reserve Bank of India or updates on credit growth data, could act as the catalyst that breaks the current consolidation either way.