In March, foreign institutional investors (FIIs) sold Rs 60,655 crore worth of bank stocks, representing over half of the total Rs 1.18 lakh crore withdrawn from Indian equities. This sell-off caused the Nifty Bank index to plunge 17%, with Nifty PSU Bank suffering a nearly 20% drop, marking it as the worst-performing segment. Analysts, including Dr. V K Vijayakumar, Chief Investment Strategist at Geojit, argue that the current valuations of banks are compelling for long-term investors. Jefferies has upgraded its rating on banks, citing COVID-level low valuations and potential government support as factors that could lead to an outperformance in bank stocks. HDFC Bank, in particular, experienced significant selling, with FIIs reducing their stake by nearly 4 percentage points following a governance crisis. Despite this turmoil, mutual funds increased their holdings in HDFC Bank from 26.66% to 29.54%. Analysts maintain a positive long-term outlook for the banking sector, although some firms like Bank of America have downgraded their ratings on rate-sensitive sectors.