Foreign portfolio investors increased short positions in Nifty Bank futures following the release of second-quarter earnings from India’s largest private lenders.
The move reflects growing concern over net interest margin (NIM) compression across the sector, even as many banks reported higher headline profits driven by lower provisioning costs.
The selling pressure in bank derivatives underscores a shift in foreign investor sentiment toward Indian financials.
While top-tier private banks such as HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank delivered robust bottom-line results, the underlying earnings quality is being scrutinized.
Narrowing NIMs suggest that the benefit of higher lending rates is being offset by rising deposit costs, a dynamic that could weigh on future profitability if the trend persists.
This development adds to a broader narrative of foreign capital withdrawal from Indian equities.