Indian Bank, Canara Bank jump 40% in FY26. Are PSU bank stocks set for a golden comeback? – News Air Insight

India’s public sector banks have stormed back to center stage in FY26, delivering a remarkable performance that’s shaking up the banking landscape. The Nifty PSU Bank Index has surged over 20% in just six months, bouncing back strongly from last year’s 11% drop. Meanwhile, the Nifty Private Bank Index managed a modest 5.5% gain in the same period, underscoring the magnitude of the PSU comeback.

Out of the 12 Nifty PSU bank stocks, 9 have been on a bullish trajectory this fiscal year. Indian Bank and Canara Bank are at the forefront, each surging by nearly 41%. Meanwhile, Bank of Maharashtra, Punjab National Bank (PNB), and Bank of India have posted strong gains of 18–20%. This widespread rally reflects growing investor confidence in the resurgence of the public sector banking space, according to ACE Equity data.

That said, not all PSU banks are soaring. Punjab & Sind Bank, UCO Bank, and Central Bank of India dipped between 11% and 31%, showing that selective stock picking remains key.

Meanwhile, Indian Bank and State Bank of India (SBI) have shown consistent strength, delivering positive returns in both FY25 and FY26, with SBI up 12.42% this fiscal. On the flip side, a few banks continue to struggle—Punjab & Sind Bank, UCO Bank, and Central Bank of India remain in negative territory in FY26, extending their losses from the previous year. Punjab & Sind Bank is the worst performer, falling over 31% this fiscal after a similar drop in FY25. Overall, the data reflects a strong turnaround in PSU banks, though a few laggards still face pressure.

Analysts Turn Bullish on PSUs

Public sector banks (PSU banks) are emerging as one of the strongest bets in the financial space, said Dipan Mehta, Director at Elixir Equities in interview to ET Now. According to him, PSU banks have stronger balance sheets and growth prospects compared to private sector peers like HDFC Bank, Axis Bank, and IndusInd Bank.

“PSU banks are amongst the brightest spots within the banking and NBFC space. Their internal growth dynamics are now equal to or better than private banks,” Mehta said. He added that switching to stocks like SBI, Bank of Baroda, Bank of India, and even PNB makes sense for investors looking for better growth visibility.

The Profit Power Shift

Backing this optimism, Vaibhav Vidwani, Research Analyst at Bonanza, pointed out that PSU banks now contribute nearly 48% of total banking sector profits. For the first time in 15 years, their return on assets (RoA) crossed 1%, reaching 1.1% in FY25.

He added that PSU lenders have also outpaced private banks in advance growth — a trend not seen since 2010 — underscoring the sector’s competitive resurgence.

What Lies Ahead?

With robust capital positions, improving asset quality, and strong credit demand, PSU banks appear well-poised to sustain this momentum. As FY26 progresses, all eyes will be on whether the sector can maintain its pace — and possibly end the year as the biggest market story of the fiscal.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)