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From Diablo Wiki
→Sanctuary
* Since Sanctuary bypasses physical resistance, it actually works even better than the numbers would indicate. Level 1 Sanctuary grants 150% bonus damage against a monster with 50% physical resistance, while Level 20 Fanaticism's 373% damage bonus is cut to 187%. Level 20 Sanctuary is more than 4x as damaging as level 20 Fanaticism, against most undead in Hell. (Though it works only against Undead, and grants no attack speed or attack rating bonuses.)
* The pulse damage (also, it causes knockback) is holy type damage, NOT magical. Holy type damage is different from magical type damage so magical immunity/resistance has no bearing on holy type damage. But unlike magical type damage, Holy damage ONLY works on undead.
* HK's edit. the first bullet, Ignores Physical Resistances and Immunities Of Undead Monsters, and the third bullet, Sanctuary does not break the physical immunity of undead monsters, but it does allow physical attacks to leach life and mana from them, are inconpatible with each other or were worded badly. at least i'm confused as to them. the first bullet says it IGNORES resistance/immunity and the third bullet says it does NOT BREAK the phys immunity. maybe some one could fix, clear up, or explain (if they do NOT conflict with each other).
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