Nifty Bank index hits all-time high; HDFC, Axis, Canara Bank soar up to 8%

Bank stocks rally on India-US trade deal, and hopes of the government raising FDI cap in PSBs to 49 per cent, and relaxing voting rights, believe analysts.

Bank shares today

 

Banks - private as well as public sector - were in demand, and rallied up to 8 per cent on the National Stock Exchange (NSE) in Tuesday’s intra-day trade after India and the United States (US) reached a trade agreement.

 

The Nifty Bank index surged 5.4 per cent to hit an all-time high of 61,764.85 on the NSE in intra-day trade. The index surpassed its previous high of 60,437.35 touched on January 5, 2026.

 

Axis Bank and Canara Bank zoomed 8 per cent each in intra-day trade, while HDFC Bank and Union Bank of India soared 7 per cent each. Bank of Baroda, Federal Bank, State Bank of India (SBI), IDFC First Bank, Punjab National Bank and AU Small Finance Bank were up 6 per cent each.

 

 

SBI (up 6 per cent at ₹1,089.80), Axis Bank (8 per cent at ₹1,418.30) and Federal Bank (6 per cent at ₹298.25) hit new all-time highs in intra-day trade today.

 

At 12:13 PM; Nifty Bank index was up 2.65 per cent at 60,170.25, as compared to 3 per cent rise in the Nifty 50.  READ STOCK MARKET UPDATES TODAY LIVE

Why did public and private sector banks rally on Tuesday?

 

The US President Donald Trump on Monday announced his country's much-awaited trade deal with India, reducing the reciprocal tariff on Indian goods to 18 per cent from 25 per cent and completely removing the 25 per cent punitive tariff related to Indo-Russian oil trade

 

This resulted in a 32 percentage point reduction in the applicable tariff, not only making Indian exports more competitive in the US markets but also triggering a chain reaction of positive developments that could enhance the performance of Indian markets. This is a high-impact development and will have a multi-layered positive effect on the Indian economy, prevailing market sentiments, and sectors exporting to the US, which will benefit from better competitiveness, according to analysts at Motilal Oswal Financial Services.

 

With the fog of uncertainty now being lifted, the brokerage firm believes that multiple positives will accrue in the form of reversal of foreign institutional investors (FII) outflows, INR recovering its lost ground, general improvement in sentiments towards Indian equities, return of confidence for foreign direct investment (FDI), and retracement of India’s underperformance vs. Emerging Markets peers, etc.

 

With this deal announcement, we believe that the market will now begin to accord correct weightage to the improving trajectory of corporate earnings growth, which has shown successive improvement over the quarters with an improving earnings revision trend, analysts said.

 

On financials, there is no direct impact, but concerns on Small and Medium Enterprises (SME) lending, credit growth outlook, partly due to tariff overhang, will ease and aid sector performance. There are second-order beneficiaries, as there will be a lot of asset quality ease at SME and credit growth, the brokerage firm said.

 

The trade deal is structurally positive for India’s medium-term growth and external stability. Improved market access and tariff certainty are likely to boost exports, support manufacturing investment, and strengthen inflows of FDI. Over time, this should help narrow the current account deficit, stabilise the rupee, and reduce India’s vulnerability to global shocks, Axis Securities said.  ALSO READ | Motilal Oswal sector of the week: Top bank stocks to buy amid PSL push

Government examines a proposal to raise FDI cap in PSBs

  Meanwhile, as per media reports, the government is examining a proposal to raise the FDI cap in public sector banks (PSBs) to 49 per cent from the current 20 per cent as part of a broader banking reform agenda aimed at strengthening capital and accelerating growth. 

 

The reform discussion also extends to private sector banks, where investors have long sought higher voting rights to better align ownership with control. The voting rights cap in private banks was last raised from 10 per cent to 26 per cent in 2012, but both the RBI and the government have remained cautious about any further relaxation, citing concerns around governance standards, ownership concentration and systemic stability, ICICI Securities said in a note.

 

Increase in FDI limit along with relaxation in voting rights is expected to boost investor’s interest and thus aid business fundamentals and valuation, the brokerage firm said.  ==========================================  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.