Nifty PSU Bank index jumps on robust Q2 earnings
The Nifty PSU Bank index climbed more than 2% on Monday, driven by a sharp 3–5% rally in Bank of Baroda and Canara Bank shares following their strong Q2 FY26 earnings and supportive policy news.
Brokerages turned more bullish on Bank of Baroda after it reported better-than-expected margins and asset quality, while Canara Bank showed steady improvement in its asset quality metrics, News.Az reports, citing foreign media.
All 12 constituents of the PSU Bank index traded in the green, reflecting broad investor optimism fueled by robust quarterly results and consolidation hopes in the public sector banking space.
Bank of Baroda shares rose 4.6 percent to Rs 291.2 as of 11 am, helping lift the Nifty PSU Bank index by 2.19 percent to 8,363.2.
The stock hit an all-time high after the lender reported a better-than-expected July-September-quarter performance.
It reported a 5-basis-point rise in net interest margin to 2.96 percent despite the 100-basis-point repo rate cut in June, and improvement in asset quality. Profit after tax fell 8 percent year-on-year but grew 6 percent sequentially, aided by a sharp reduction in provisions.
Canara Bank shares gained 2.88 percent to Rs 140.94 after the public sector bank reported an improvement in gross and net NPAs on a sequential basis in its September-quarter results last week. Net profit rose 19 percent year-on-year to Rs 4,774 crore, while global advances and deposits grew 13.74 percent and 13.40 percent, respectively.
Investor sentiment in public-sector banks also found support from policy-linked developments. Earlier, last week, reports said the government is considering permitting up to 49 percent direct foreign investment in state-owned lenders, more than double the current 20 percent cap.
The finance ministry has been in talks with the RBI for several months on the proposal, according to reports, with the move aimed at reducing the regulatory gap between public- and private-sector banks -- where foreign ownership is allowed up to 74 percent. Such a shift could open the door to greater overseas capital participation and improve capital-raising flexibility for PSU lenders in the years ahead.
Separately, another report indicated the government is exploring a merger between Union Bank of India and Bank of India, potentially creating the country’s second-largest public-sector bank after SBI. The effort, according to the report, is part of a broader reform plan to scale up state-owned lenders and streamline overlapping operations.
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