MUMBAI: Public sector banking stocks extended their winning streak for the third consecutive session on Wednesday, February 18, with the Nifty PSU Bank index surging to an all‑time high of 9,647. All 12 constituents of the index traded higher, led by Punjab National Bank (PNB), which jumped over 3% to touch a fresh 52‑week high of ₹128.40 [citation:1][citation:9].
Prev high: ₹135.15 (Feb 06)
Market cap > ₹12 lakh cr [citation:1]
Motilal Oswal target ₹175 [citation:4]
Part of broader PSU surge [citation:9]
Nifty PSU Bank index: record high, broad participation
The Nifty PSU Bank index climbed 1.54% on Wednesday to hit 9,647, after gaining 2.11% in the previous session. The three‑day cumulative gain now stands at approximately 5.22% [citation:1]. Other notable performers included Indian Overseas Bank, Punjab & Sind Bank, Union Bank of India, UCO Bank, and Indian Bank — all reaching fresh 52‑week highs during the session [citation:1].
- Nifty PSU Bank index: +5.22% (cumulative) to record 9,647 [citation:1]
- Nifty Bank index: hovering near 61,764, 0.50% away from record [citation:1]
- India VIX: cooled 3.5% to ~12, signalling reduced nervousness [citation:9]
- Breadth: All 12 PSU bank stocks advanced [citation:1][citation:9]
What’s driving the rally: Q3 earnings and credit growth
The sustained buying momentum is underpinned by strong December quarter earnings, accelerated credit growth, margin recovery, and improved asset quality across public sector banks [citation:1].
Brokerage views: structural upswing
Domestic brokerage JM Financial noted that the banking sector reported steady improvement in 3QFY26, characterised by broad‑based acceleration in credit growth, resilient margins, and continued benign asset quality. PSBs continued to lead systemic growth at around 15% YoY, with their outperformance over private banks widening [citation:1].
Axis Securities added that PSU banks under its coverage saw credit growth outpace larger private banks, driven mainly by retail and secured SME segments, while corporate loans showed gradual revival [citation:1].
SBI: highest-ever quarterly profit
State Bank of India reported its highest‑ever quarterly net profit of ₹21,028 crore in Q3 FY26, a 24.5% YoY increase [citation:2]. Net interest income grew 9% to ₹45,190 crore. Following the results, brokerages including Nomura, CLSA, Citi, and Jefferies raised target prices, with Jefferies setting a target of ₹1,300 [citation:2]. The bank also raised its FY26 loan growth guidance to 13‑15% [citation:2].
PNB leads the pack
Punjab National Bank jumped over 3% to ₹128.40, hitting a 52‑week high. The stock has gained 23% over the past year, with strong Q3 numbers and improved asset quality driving sentiment [citation:3][citation:7].
Canara Bank: ratings reaffirmed, target raised
Canara Bank gained 2.3% to ₹145.04. India Ratings and ICRA reaffirmed credit ratings with a stable outlook, citing robust profitability and strong capitalisation. Motilal Oswal reiterated ‘BUY’ with a target price of ₹175, noting that net interest margin is close to bottoming out [citation:4].
Q3 FY26 performance of key PSU banks
| Bank | Net Profit (Q3) | YoY Growth | NII Growth |
|---|---|---|---|
| SBI | ₹21,028 cr | +24.5% | +9% |
| PNB | ₹5,100 cr (Dec qtr) | — | — |
| Canara Bank | beat on stake sale gains | — | in line |
| System-wide | PSB credit growth ~15% YoY [citation:1] | ||
Market breadth and technical levels
The Nifty Bank index is less than 0.5% away from its 52‑week high of 61,764, with support near 61,200 and 61,000. Derivatives data show strong put writing near 25,700 and 25,600 strikes, providing a cushion [citation:9].
Outlook: analysts remain constructive
JM Financial expects PSB loan growth to remain healthy, with credit costs moderating further. The brokerage highlighted that slippages remained stable in Q3, supported by improving retail collections and gradual normalisation of stress in the microfinance segment [citation:1].
Axis Securities noted that the outlook for unsecured segments has turned optimistic, with lenders indicating better disbursement momentum going into Q4 and growth picking up from FY27 onwards [citation:1].
Macro and global cues supportive
Softer crude oil prices (Brent below $82/barrel) and a stable rupee (around ₹90.68/USD) have aided sentiment. Asian markets were mostly higher, while U.S. futures pointed to a positive open [citation:9][citation:10].
Key takeaways for investors
- Sustained earnings momentum: PSU banks reported broad‑based earnings growth with improving asset quality.
- Credit growth accelerating: PSBs leading at ~15% YoY; retail and SME segments driving demand [citation:1].
- Valuations reasonable: P/E and P/B multiples remain below historical peaks; dividend yields attractive (PNB ~2.4%, Canara ~2.8%) [citation:3][citation:8].
- Technical breakout: Nifty PSU Bank index at all‑time high; momentum likely to continue with stock‑specific action.
- Risks: Monitor global interest rate trajectory and potential volatility in microfinance portfolios.
The three‑day rally reflects renewed confidence in the PSU banking space, backed by fundamental improvements and a supportive macroeconomic environment. With all 12 index constituents participating, the move appears broad‑based and structurally driven [citation:1][citation:9].
What the third‑day rally means
- Record highs: Nifty PSU Bank index scaled 9,647; PNB, SBI, Canara, BoM, Union Bank among 52‑week highs [citation:1].
- Earnings power: SBI’s highest‑ever profit and PNB’s strong performance underscore earnings recovery [citation:2][citation:7].
- Brokerage upgrades: Multiple target price hikes post Q3; analysts see further re‑rating [citation:2][citation:4].
- Credit growth leadership: PSBs outpacing private peers, gaining market share [citation:1].
Disclaimer: The information and broker views are for informational purposes only. Investors should consult certified advisors before making investment decisions.