PSU banking stocks continued to ride the bull wave for the seventh straight session on Tuesday, January 6, even as the broader markets remained range-bound. After rising 0.5% in the previous session, the Nifty PSU Bank index advanced another 1.32% to hit a fresh record high of 8,856, taking its seven-day cumulative gain to nearly 7%.
All 12 constituents of the index were trading higher, led by Union Bank of India, which jumped 3% to the day’s high of 167 apiece. Bank of India, SBI, Bank of Maharashtra, Canara Bank, Indian Bank, and UCO Bank also traded with gains of over 1%.
On Monday, the Nifty Bank index also touched a record high of 60,437, underscoring resilient Street sentiment toward banking stocks.
The optimism is driven by growing expectations of a strong December-quarter performance amid a pickup in system-wide credit growth, as reflected in the Q3 business updates of key banks, which showed an improvement in gross advances.
The Reserve Bank of India cut the key policy rate by a cumulative 125 basis points through December. In addition to the repo cuts, GST rationalization and earlier income tax reductions have supported credit growth in the system.
As per the latest fortnightly data (15th Dec 2025), system credit growth rose to 12% YoY (vs. 11.5% YoY on 28th Nov 2025), while deposit growth moderated to 9.4% YoY (vs. 10.2% YoY on 28th Nov 2025).
RBI’s sectoral credit data for November 2025 indicated an uptick in overall system credit growth to 11.4% YoY (from 11.1%/10.2% YoY in Oct/Sep 2025), led by stronger momentum across industry, retail, and services, according to domestic brokerage firm JM Financial.
In addition, the RBI’s recently released bi-annual Financial Stability Report (FSR) points to improving trends in headline asset quality numbers across India’s financial sector.
Brokerages see rise in Q3 profitability
Domestic brokerage firm Systematix Institutional Equities expects bank profitability to improve in the December quarter, driven by sustained sequential growth in advances, higher fee income, and lower credit costs.
“As expected, the healthy momentum in advances has continued this quarter, while stress in the unsecured segment continues to moderate. Going forward, we expect growth momentum in advances to sustain, supported by lower interest rates, benefits from GST rate reductions, and higher tax limits,” the brokerage added.
JM Financial echoed a similar view, forecasting a solid performance from the banking sector in the December quarter, driven by stronger credit momentum, easing cost-of-funds pressure, and improving asset quality trends.
Disclaimer, The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
