Why has the Bank Nifty bene correcting so sharply in recent weeks?

The sharp correction in the Bank Nifty in recent weeks has less to do with valuations and more to do with the fact that financials are over-owned by FPIs. For example, the Bank Nifty index has fallen 13% in the last 22 trading sessions and this fall is despite good quarterly results reported in the Sep-21 quarter.

Bank profit growth in Q2 was driven by higher loan growth, better NIMs and lower provisions, so profits are there. However, 6 out of the 10 most over-owned stocks by FIIs in India are financials with all the banks in Bank Nifty, except SBI, being over-owned by FIIs. One more factor is that these financials are also very liquid and easy to exit.