Nifty PSU Bank logs biggest weekly surge in 7 months; PNB, Bank of India, Bank of Baroda among top performers
A Ksheerasagar
Shares of PSU banking stocks have emerged as hot picks among Dalal Street investors this week, turning the sector into one of the market's stellar performers, with several stocks posting double-digit gains. Better-than-expected second-quarter results, expanding credit demand and a revival in broader market sentiment have all supported the rally.
Extending its weekly winning run to a third consecutive week, the Nifty PSU Bank index advanced another 8%, marking its biggest weekly in seven months. Over the past three weeks, the index has gained a cumulative 15%, with the winning streak pushing it to its highest level since March.
Among individual stocks, Punjab National Bank emerged as the top performer, surging 13.3% to ₹143. It was followed by Bank of India, Bank of Baroda and Punjab & Sind Bank, all of which rallied between 9.5% and 11%.
Other stocks in the pack, including Union Bank of India, Bank of Maharashtra, State Bank of India, Canara Bank, Central Bank of India, Indian Bank and UCO Bank, also closed higher, posting gains in the range of 4% to 8%.
India's credit growth is gaining momentum as festive-season spending drives consumer borrowing, while companies are also increasing their reliance on bank loans.
Banks have raised nearly $133 billion through foreign currency deposits from non-resident Indians under a special Reserve Bank of India (RBI) scheme, supporting deposit mobilisation and credit growth. However, the higher cost of attracting these deposits has put pressure on banks' margins.
Domestic brokerage firm Motilal Oswal remains upbeat on systemic credit growth and estimates 16.5% year-on-year (YoY) growth for FY27, factoring in substantial FCNR(B) inflows. It expects banking sector earnings to rebound, delivering a compound annual growth rate (CAGR) of around 17% over FY26-FY28, fuelled by approximately 17% CAGR in net interest income (NII).
Kotak Institutional Equities said the banking sector was positioned to benefit from the changing interest rate environment, although the extent of improvement would depend on funding costs and the duration of the rate cycle.
The brokerage noted that banks were replacing higher-cost wholesale borrowings with lower-cost term deposits, including through foreign currency non-resident (FCNR) deposits. It also expects lending to gradually shift away from corporate loans, where some of the recent demand appears to be linked to higher working capital requirements.
Asset quality remained firm during the quarter, with lower fresh additions to bad loans supporting the trend. Kotak said it saw limited near-term asset-quality risks in banks' gold-loan portfolios, given their customer mix, which is tilted towards larger borrowers with relatively lower risk profiles.
PSU banks reported aggregate net profits of ₹59,367 crore in Q2 FY27, marking a 20% year-on-year (YoY) increase and slightly surpassing the combined net profit of private sector lenders, which stood at ₹57,095 crore.
Their net interest income (NII) grew 15.9% YoY, marginally outpacing the 15.1% growth recorded by private banks. Other income rose 4.2% YoY to ₹51,669 crore while also registering an 11.2% sequential increase. Net interest margins (NIMs) showed greater resilience, expanding by 15 basis points YoY to 2.58%, as lending yields increased faster than funding costs.
A Ksheerasagar
Ksheera Sagar has been working as a Market Research Analyst at LiveMint for the past four years, covering stocks, commodities, and broader financial markets. In this role, he closely tracks daily market movements, corporate earnings, sector trends, and macroeconomic developments. <br><br> He has over a decade of experience in the financial services industry and has previously worked with multiple organisations, including global investment bank J.P. Morgan, bringing strong research experience into the newsroom. <br><br> During his career, he has gained extensive exposure to equity research, market analysis, and financial data interpretation, strengthening his expertise across asset classes and market cycles. <br><br> He is known for his data-driven analysis and crisp, listicle-style market stories that break down complex financial developments across key markets for a wide audience. His strong research skills enable him to write detailed and insightful stories on stocks and sectors, focusing on the underlying factors driving market movements. <br><br> His work combines quantitative insights with clear storytelling, presenting financial developments in a clear and structured manner. Moreover, he enjoys writing multibagger and listicle-style copies. Outside of work, Ksheera enjoys playing the piano and exploring new places. He has a keen interest in travel, music, and continuously learning about global markets and economic trends.
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HomeMarketsStock MarketsNifty PSU Bank logs biggest weekly surge in 7 months; PNB, Bank of India, Bank of Baroda among top performers
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