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 declined 1% to its intraday low of 57,651.15, reflecting broad-based selling across private sector lenders. While the market largely expects the RBI to leave interest rates unchanged, investors are increasingly focused on whether the Governor Sanjay Malhotra-led Monetary Policy Committee (MPC) signals a tougher stance to combat inflation that has moved above the central bank’s comfort level.
Federal Bank emerged as the biggest drag on the banking index, falling more than 3%. Axis Bank lost over 1.5%, while AU Small Finance Bank, HDFC Bank, State Bank of India (SBI), ICICI Bank and IndusInd Bank declined between 0.5% and 1%. In contrast, Canara Bank, Bank of Baroda and Punjab National Bank traded in positive territory, bucking the broader weakness in banking shares.
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.
RBI policy in focus
The RBI’s Monetary Policy Committee, chaired by Governor Sanjay Malhotra, will hold its fourth policy meeting of 2026 against the backdrop of simmering conflict in West Asia and rising inflationary pressures. Retail inflation accelerated to 4.38% in June, moving above the RBI’s medium-term target of 4%, adding to uncertainty over the future trajectory of monetary policy.
At its previous policy meeting in June, the MPC kept the repo rate unchanged at 5.25%. While the decision was widely expected, markets are now keenly watching for guidance on the direction of borrowing costs in the coming months as inflation risks remain elevated.
Economists broadly believe that the RBI will maintain the status quo at this week’s policy meeting. However, many believe that the tone of the policy statement could become more hawkish if inflation continues to remain above the central bank’s target or if global risks intensify.
According to a Reuters poll, 68 of the 72 economists surveyed expect the RBI to leave the policy rate unchanged when Governor Sanjay Malhotra announces the monetary policy decision on Wednesday.
Prachi Kele, Lead Economist at PL Capital, expects the central bank to maintain its cautious approach while keeping policy rates unchanged.
“We expect MPC to adopt a cautious tone amid ongoing war-related uncertainties, while reiterating a data-dependent approach for future policy decisions. For the August meeting, we expect a status quo, with the policy rate maintained at 5.25%.
A favourable response to FCNR(B) measures, improving FPI inflows as the AI- and semiconductor-led equity rally cools amid improved kharif sowing support the thesis for a pause. Food inflation is likely to remain contained in FY27 as El Niño risks recede and monsoon conditions remain favourable, while growth risks stay broadly balanced.”
The commentary suggests that while several macroeconomic factors support a pause in interest rates, the RBI is unlikely to offer an outright dovish signal given inflation has already exceeded its target. This explains why banking stocks remained under pressure despite expectations of unchanged rates. Investors appear to be pricing in the possibility that future policy easing may become more difficult if inflation remains elevated.
Anthropic expands India operations with local AI infrastructure
Separately, artificial intelligence startup Anthropic announced a major expansion of its India operations on Monday, with its Claude AI models set to become available through in-country inference via Amazon Bedrock.
The move means customer requests will be processed on servers located within India, enabling organisations to deploy artificial intelligence applications while ensuring sensitive data remains within the country’s borders. The development is expected to benefit industries where data localisation is a regulatory or operational priority.
Anthropic said the India-based endpoint will be particularly useful for sectors such as banking, insurance and government, where compliance with data localisation requirements is an important consideration.
As part of its India expansion strategy, the company also announced new enterprise partnerships and said it plans to strengthen its domestic partner ecosystem.
According to the company, India has recorded among the highest registrations for its Claude Partner Network globally. Building on this momentum, Anthropic aims to certify 5,000 professionals through its partner ecosystem in the country, strengthening local artificial intelligence capabilities and supporting wider enterprise adoption.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.
