Banking stocks emerged as top laggards in August, with the Nifty Bank shedding another 4.12% to record its worst monthly performance since January 2024, taking its cumulative two-month decline to nearly 6.4%.

Selling was broad-based, as 10 out of the 12 index constituents ended the month in the red. The steepest fall was seen in IndusInd Bank, which dropped 7.4%, followed by Federal Bank, ICICI Bank, Canara Bank, Punjab National Bank, and HDFC Bank, which lost between 5% and 7%.
The underperformance of banking heavyweights also dragged down the benchmark indices, sending Nifty 50 and Sensex lower by 1.3% and 1.8%, respectively, in August.
The yield on the Indian 10-year G-Sec rose toward 6.6% in August, its highest level since March 27, as fiscal worries and muted demand weighed on sentiment. The yield ended the month 21 basis points higher, marking its biggest monthly jump since September 2022, raising concerns that hardening yields could hurt banks’ treasury income in the second quarter of the current fiscal year. 
This is significant as treasury income had emerged as a strong earnings lever for banks in the June quarter amid the ongoing NII crunch, aided by a sharp moderation in policy rates, RBI’s OMOs, and supportive liquidity conditions.

Between December 2024 and June 2025, the 10-year G-Sec yield had corrected from 6.8% to 6.3%, enabling healthy gains for the banking system.