The Nifty Bank index, tracking 12 major banking stocks, surged 695 points (1.18%) to a record high of 59,515, with all constituents trading higher. On the PSU front, the Nifty PSU Bank index climbed 179 points (≈2.11%) to an all-time high of 8,665.70, while the BSE BANKEX also jumped 771 points to 66,789.18, reflecting broad-based sectoral strength.
Among Nifty Bank constituents, Axis Bank led gains with a 1.8% jump, followed by HDFC Bank, IndusInd Bank, and IDFC First Bank with increases in the 1.2%–1.8% range. Public banks like Canara Bank and Punjab National Bank also advanced. On the PSU-banking side, UCO Bank topped gains, rising ~1.8% to ₹31, along with other public banks including Indian Overseas Bank, Bank of India, Union Bank of India, Bank of Baroda, and Indian Bank.
Underlying fundamentals support this rally. Private banks such as HDFC Bank, ICICI Bank, and Kotak Mahindra Bank posted 4–7% growth in net interest income (NII) for Q2, with Axis Bank growing modestly by 2%. Public sector banks like SBI, Canara Bank, and Bank of Baroda achieved 2–4% YoY NII growth, benefiting from lower provisioning, resulting in stronger net profitability. Overall, PSU banks reported 8.5% YoY net profit growth, outperforming private banks, which saw a –0.2% decline.
Credit growth remained healthy across the sector: public banks delivered >10% growth, while HDFC, ICICI, and Axis Bank grew 9–12%. Investor sentiment is bolstered by expectations of a second round of PSU bank consolidation, aiming to create larger state-run entities, fueling buying interest in PSU-bank stocks.
Globally, banks are viewed positively. JPMorgan forecasts a potential inflection point with improving return on assets (RoA) through loan growth, NIM stabilization, and operating leverage, projecting a 17% CAGR in net profit for FY26–28.
For the market and investors, the rally signals a robust banking recovery, with both private and PSU banks showing strong profitability, sustained credit growth, and potential policy tailwinds. If banks maintain asset quality, margin recovery, and credit momentum, the uptrend could continue, particularly for PSU banks likely to benefit from consolidation.