Here's how the Banking stocks are doing today

The entire banking sector came under selling pressure on Tuesday after private sector lender HDFC Bank announced a 35 bps cut in its base rate to 9.35 percent.

This move will force rivals to also cut their lending rates at a time when the sector is saddled with a growing problem of non-performing loans and sluggish credit demand. As a consequence, Bank Nifty dropped 367 points, or 2.1 percent, to 16,779 points.

HDFC Bank said it was passing on the cut in overall rates by the Reserve Bank of India to customers in a bid to boost lending. The base rate is linked to the lending rate of every bank. Rivals such as ICICI Bank and State Bank of India will be forced to replicate this move or else face an exodus of customers.

All 22 banking futures slid between 1 percent to 4.8 percent in the derivatives space. The losses worsened on the PSU banks as they are facing the worst NPA crisis in at least 20 years. Futures of Punjab National Bank, Bank of India, Canara Bank and IDBI posted losses of between 3-4 percent. Losses on private sector banking futures amounted to 1.3-3.4 percent. PNB showed the highest rise in Open Interest, of 8.4 percent.

Losses on the CNX PSU Bank Index were higher than other indices. The Index fell 2.6 percent, or 83 points, to 3,116 points.

Overall, the banking sector saw a 2.7 percent rise in Open Interest accompanied by a drop in prices, showing a build up of short positions.

Image credit: Indiatimes