PSU Bank index zooms 24% since Sep; Bank of Baroda, Canara near record high

Bank of Baroda, Canara Bank, Bank of India, Union Bank of India, Uco Bank, Punjab & Sind Bank, Bank of Maharashtra, Indian Overseas Bank and Indian Bank were up in the range of 2-5% in Monday's trade.

Nifty PSU Bank index extends rally, zooms 24% since Sept

 

Shares of public sector banks (PSBs) continued their upward movement, with the Nifty PSU Bank index hitting a new high of 8,356.50, surging 2.1 per cent on the National Stock Exchange (NSE) in Monday’s intra-day trade after state-run banks reported healthy earnings for the quarter ended September 2025 (Q2FY26).

 

Bank of Baroda (₹292.75) and Canara Bank (₹141.45) rallied 5 per cent and 3 per cent, respectively, in intra-day deals today. Bank of India, Union Bank of India, Uco Bank, Punjab & Sind Bank, Bank of Maharashtra, Indian Overseas Bank and Indian Bank were up 2 per cent each.

 

 

Shares of State Bank of India (SBI) hit a new high of ₹948.7, up 1 per cent on the NSE in intra-day trade ahead of Q2 results on Tuesday, November 4, 2025. Bank of Baroda (BoB) and Canara Bank quoted close to their respective all-time highs.

 

At 09:42 AM; Nifty PSU Bank index, the top gainer among sectoral indices, was up 1.4 per cent, as compared to 0.01 per cent rise in the Nifty 50. Since September, the Nifty PSU Bank index has zoomed 24 per cent. 

 

What’s driving PSU banks?

 

PSBs so far announced their Q2 results, and have reported a healthy earnings. Motilal Oswal Financial Services said PSBs are well positioned to benefit from any capex recovery, though near-term growth will continue to be funded by RAM assets. Stronger capital positions, cleaner balance sheets, and prudent provisioning make PSBs more resilient and limit cyclicality in earnings and asset quality relative to past cycles.

 

Among individual stocks, BoB has rallied 5 per cent to hit a multi-year high of ₹292.75 on the NSE in intra-day trade. The stock had hit a record high of ₹298.45 on June 3, 2024.

 

Strong RAM (retail, agriculture and MSME) - led growth, healthier liabilities mix, and resilient asset quality are expected to support profitability. However, margin trajectory is expected to remain range-bound, while preparation for expected credit loss (ECL) adoption is expected to result in recurring additional burden. Thus, ICICI Securities in note said that they continue to value the bank at ~0.9x FY27E BV and marginal revise its target to ₹290 per share (earlier ₹280). Given recent run-up in stock price, downgrade rating to Hold, the brokerage firm said.  ALSO READ | SBI, BoB, PNB among 5 PSU Bank stocks that can rally up to 17%; say charts

 

Analysts at InCred Equities, while maintaining 'ADD' rating believe that Canara Bank is well-placed to offset some margin compression by moderating credit costs over the next few years. It will also benefit from the stake sale/listing of life insurance and asset management company (AMC) subsidiaries in Q3FY26F (~₹2,000 crore; 10bp of average assets). The risk-reward ratio, at the current valuation of 0.8x Sep 2027F, still offers a decent upside. The brokerage firm has increased target price to ₹147 (₹127 earlier) as the brokerage firm said they will roll forward the valuation by six months and revisit earnings estimates.

 

Meanwhile, as per media sources, the government is considering raising the foreign institutional investment (FII) limit in PSBs from 20 per cent to attract more capital while retaining a minimum 51 per cent government stake. Policymakers believe this reform can strengthen PSBs into globally competitive institutions as part of the Viksit Bharat 2047 vision. 

 

According to Nuvama Institutional Equities, the proposal could take a couple of quarters to clear, and MSCI would reflect the higher headroom only after implementation. So, while it may be a long road to actual implementation and passive inflows, if there’s any truth to this development.