Indian Banks: A Value Play?

Indian bank stocks have become an attractive entry point after a recent slide, according to BofA Global Research, which flagged the sector as a buying opportunity on April 9. The firm said valuations for large private lenders look compelling following a stretch of relative weakness in banking shares.

BofA’s call comes after Indian bank stocks lagged broader equities since the start of the Iran war at the end of February 2026. Over that period, the Nifty Bank index fell 8%, while the benchmark Nifty 50 declined 4.7%, highlighting a sharper pullback in financials than in the wider market.

The selloff has pushed some major private banks to valuation levels that BofA described as unusually depressed versus their own history. The firm said certain large private lenders are trading around 1.5 to 2.5 standard deviations below their historical average valuations, a gap it views as supportive for selective buying.

Foreign flows were cited as a key driver of the pressure on the sector. BofA noted that foreign investors sold 606.55 billion rupees ($6.53 billion) of financial services shares during March, adding to the drawdown and contributing to the sector’s underperformance.

Looking ahead, BofA expects a policy move that could improve bank profitability. The firm anticipates a rate hike by the Reserve Bank of India later this fiscal year, and said higher rates would be likely to lift bank margins and reinforce earnings.

In contrast, BofA said India’s information technology sector may struggle in the near term even though the IT index has risen 3.1% since the Iran war began. The firm linked its cautious stance to the disruptive effects of artificial intelligence, arguing that clients may revisit spending plans and that automation could influence demand for outsourcing.

Reflecting these views, BofA said it continues to rate large private sector banks as “Overweight” and the IT sector as “Underweight.” The firm’s positioning underscores a preference for financials over technology within Indian equities at a time when geopolitically linked risk sentiment and cross-border flows have been moving sector performance.

Uncertainties remain around the timing and magnitude of any Reserve Bank of India rate hike later this fiscal year, and around how quickly artificial intelligence-driven changes translate into client spending decisions. BofA’s assessment is based on current valuation signals, recent market performance, and its expectations for policy and sector dynamics.