Sunday, 5th April 2026
Khabor Wala Desk
Published: 1st February 2026, 10:20 AM
Shares of India’s public sector banks (PSBs) tumbled sharply following the presentation of the Union Budget 2026 by Finance Minister Nirmala Sitharaman in Parliament on 1 February 2026. The sell-off saw the Nifty PSU Bank index decline by nearly 7 per cent during intraday trading, reflecting heightened investor caution.
The Nifty PSU Bank index opened at 9,019.35 points, but slipped to an intraday low of 8,387.95, before recovering slightly to trade around 8,684.95 by 2:00 PM — down 334.40 points, or 3.71 per cent.
All constituent banks were in the red, with major losses concentrated among larger PSBs:
| Bank | Intraday Fall (%) | Notes |
|---|---|---|
| Bank of India | 7.0% | Steepest fall among large PSBs |
| Bank of Maharashtra | 6.5% | Investors wary of government borrowing impact |
| Indian Bank | 5.8% | Concerns over asset-liability management |
| Bank of Baroda | 5.5% | Market reacting to absence of immediate recapitalisation |
| Union Bank of India | 4.9% | Trading below previous session’s levels |
| State Bank of India | 3.0% | Moderate fall, reflecting strong fundamentals |
| Indian Overseas Bank | 3.0% | Small-to-mid cap volatility |
| Central Bank of India | 2.9% | Minor decline |
| Punjab & Sind Bank | 2.8% | Relatively stable |
| Canara Bank | 2.7% | Slight sell-off |
| Punjab National Bank | 2.6% | Investor caution persists |
| UCO Bank | 2.5% | Low market sensitivity |
The sharp sell-off followed Finance Minister Sitharaman’s announcement of a record ₹17.2 trillion in market borrowings for FY27. Additionally, the government outlined a 9 per cent increase in capital expenditure and emphasised a review of banking sector reforms aligned with the “Viksit Bharat” vision.
Anil Rego, founder and fund manager at Right Horizons PMS, explained that the sustained capex push supports medium-term credit growth, particularly in infrastructure, MSME financing, and working capital.
Sitharaman also announced the formation of a high-level committee to review the banking sector’s structure, regulatory framework, and readiness for India’s next phase of economic growth. “The banking sector today is characterised by strong balance sheets, improved asset quality, and coverage exceeding 98 per cent of villages across India,” she noted.
Varun Gupta, CEO of Groww Mutual Fund, highlighted that proposed restructuring of entities such as PFC and REC, alongside governance improvements, indicates a clear intent to future-proof India’s financial system. “Thoughtful execution of these reforms can materially enhance credit delivery and systemic resilience,” he added.
However, analysts caution that the absence of immediate recapitalisation or credit guarantee measures may limit near-term upside for PSBs, even as structural reforms promise medium- to long-term gains.
Disclaimer: Views expressed are those of respective brokerages/analysts and are not endorsed by Business Standard. Readers’ discretion is advised.
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