Nifty PSU Bank index rallies 2%, hits record high; what's driving PSBs?

Union Bank of India surged 8%, while Bank of Maharashtra, Indian Bank, Indian Overseas Bank and Punjab & Sind Bank were up 4% each on the NSE in intra-day trade.

Nifty PSU Bank index movement today

 

The Nifty PSU Bank index hit a record high of 8,912.30, soaring 2 per cent on the National Stock Exchange (NSE) in Wednesday’s intra-day trade after Bank of Maharashtra and Union Bank of India (UBI) reported healthy business growth with improved asset quality for the quarter ended December 2025 (Q3FY26).

 

At 02:34 PM; Nifty PSU Bank index was up 1.7 per cent at 8,875.80, as compared to 0.44 per cent decline in the Nifty 50. The PSU bank index surpassed its previous high of 8,856.85 touched on January 6, 2025.

 

Union Bank of India surged 8 per cent to ₹180 on the NSE in intra-day trades. Bank of Maharashtra (₹67.75), Indian Bank (₹849.90), Indian Overseas Bank (₹36.77) and Punjab & Sind Bank (₹28.26) were up 4 per cent each, while Punjab National Bank, Central Bank of India, Canara Bank, Uco Bank and Bank of Baroda were around 2 per cent - 3 per cent each.

 

 

What's driving public sector banks (PSBs)?

 

Bank of Maharashtra delivered a steady performance in Q3FY26, supported by strong credit momentum and improved profitability along with steady asset quality. Gross advances grew 19.6 per cent year-on-year (YoY) to ₹2.73 trillion, led by continued traction in the retail, agriculture, and MSME (Micro, Small, and Medium Enterprises) or RAM segments, while total deposits rose 15.3 per cent YoY to ₹3.2 trillion. 

 

Net interest income (NII) expanded 16.2 per cent YoY to ₹3,422 crore, with NIM stable at 3.86 per cent. Asset quality improved, with Gross NPA/net NPA declining to 1.60 per cent/0.15 per cent (down 8 bps/ 3 bps QoQ), credit cost at 0.97 per cent, and PCR at a high 98.4 per cent. Net profit stood at ₹1,779 crore (27 per cent YoY), with RoA improving to 1.86 per cent (up 4 bps QoQ).

 

Management’s strategy of prioritising low-cost deposits, granular branch-led expansion and measured use of refinance/co-lending supports margin stability around guided levels (~3.75 per cent NIM) even in a softening rate environment. With RoA at ~1.9 per cent, RoE ~24 per cent, strong capital buffers (CET-1 ~13 per cent) and a growing gold/MSME franchise, the bank remains well placed to sustain high double-digit growth with sustained return ratios, though liability mobilisation and deposit mix will remain key monitorables, ICICI Securities said in a note. 

 

Analysts at Systematics Institutional Equities have revised its estimates to factor in strong advances growth and other business aspects. The brokerage firm earlier assumed a capital dilution of 5 per cent in FY26E but the bank has taken the OFS route for reducing the government stake and hence have reversed this assumption. “Based on our revised estimates we have revised our target price to ₹80 (from ₹73 earlier) and maintain our BUY rating on Bank of Maharashtra,” the brokerage firm said.

 

Meanwhile, Union Bank of India reported 8.97 per cent YoY growth in net profit at ₹5,017 crore in Q3FY26. NII was up 1 per cent at ₹9,328 crore. Gross NPA reduced by 79 bps on YoY basis to 3.06 per cent and net NPA reduced by 31 bps on YoY basis to 0.51 per cent as on Q3FY26.

 

Total business of the Bank increased by 5.04 per cent YoY, wherein Gross Advances increased by 7.13 per cent YoY & Total Deposit grew by 3.36 per cent YoY. Bank has a total Business of ₹22.4 trillion as on Q3FY26.

 

The RAM segment of the Bank increased by 11.50 per cent YoY, with 21.67 per cent growth in Retail and 19.75 per cent growth in MSME advances achieved on YoY basis. RAM advances as a percent of domestic advances stood at 58.84 per cent, the Bank said.

 

The PSU Bank Index has clocked a fresh all-time high after successfully retesting its earlier year-long consolidation breakout, underscoring the strength of the ongoing structural uptrend. 

 

Within the pack, Union Bank of India continues to stand out, having delivered a decisive breakout from a Cup and Handle formation, while forming a higher base above its 10-week EMA. Current upmove is backed by pick-up in volumes further validates healthy accumulation and strengthens the case for a sustainable upside breakout, thereby offering an incremental buying opportunity from a medium-term perspective, analysts at ICICI Securities said in the January 2 report. However, the stock achieved the brokerage firm’s target price of ₹175 per share today.  ===================================  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.