Indian Public Sector Banks Rally as Credit Demand Remains Steady; HDFC Bank Chairman Resigns

PSU banks price movement todayShares of public sector banks (PSBs) were in focus, with the Nifty PSU (public sector undertaking) Bank index gaining over 3 per cent on the National Stock Exchange (NSE) in Friday’s intra-day trade after a sharp rally in frontline stocks.Canara Bank, Union Bank of India (UBI), Bank of India (BOI), Bank of Maharashtra and Indian Bank were up in the range of 4 per cent to 5 per cent. Punjab National Bank, Bank of Baroda, Indian Overseas Bank, Uco Bank and State Bank of India (SBI) were trading higher by 3 per cent each.At 09:30 AM on Friday;Nifty PSU Bank index, the top gainer among sectoral indices, was up 3.4 per cent, as compared to 1.2 per cent rise in the Nifty 50.FOLLOW INDIAN STOCK MARKET UPDATES LIVEWhat’s driving PSU banks?Credit demand in the banking system remains steady in the March quarter, with public sector banks (PSU banks) continuing to gain ground in key segments such as Micro, Small and Medium Enterprises (MSME) and home loans, according to a Motilal Oswal Financial Services (MOFSL) channel-check report.Based on interactions with direct selling agents (DSAs) across western India, the brokerage said MSME credit demand remains healthy in Q4FY26, supported by competitive pricing, improved underwriting, and government-backed guarantee schemes. It also noted that stress in unsecured lending is easing, allowing lenders to re-enter the segment selectively, though real estate activity remains soft.Also ReadStock Market LIVE: Sensex gains 850 points; Nifty above 23,200; PSU Bank stocks shineOMC stocks rally on softer crude; HPCL, IOC, BPCL shares gain up to 5%Aequs shares rise 2% in trade; JM Financial sees more 15% upsideHDFC Bank falls 7% in 2 days; analysts flag pressure after chairman exitBalkrishna Industries gets new 'Buy' from JM Fin; sees 15% stock upsideAsset quality remains stable overall, though lenders are closely monitoring export and commodity sectors. Overall, January-March quarter (Q4FY26) ground checks show steady volumes and improving file quality, though real estate activity has softened. PSU banks are gaining share via Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)-driven MSME growth and stronger pipelines, the brokerage firm said in its financial sector report.PSU banks have turned materially more aggressive in the home loan segment, offering rates 30-40bp lower than private banks. SBI remains the leading PSU player and is actively supporting builder-approved project pipelines. PSU banks like Central, Canara, and Indian Bank are now focused on scaling retail. Canara Bank has been competitive and is gaining traction in home loans. BoB's digital processes improved in Q4FY26, aiding execution and volumes, analysts said.READ |HDFC Bank stock falls 7% in 2 days; analysts flag pressure after chairman exitMeanwhile, HDFC Bank’s part-time chairman and independent directorAtanu Chakraborty resignedwith immediate effect, stating that certain happenings and practices observed over the last two years were not in alignment with his personal values and ethics. He clarified that there are no other material reasons for his resignation and did not attribute the decision to any wrongdoing by the bank.The development clearly impacts investor sentiment and comes at a time when the markets are already grappling with lot of macro-uncertainty. However, the assurance from the management team, Mistry’s appointment as an interim chairman, and the RBI endorsing the corporate governance and compliance standards of the bank have helped assuage some of the grave concerns, according to MOFSL said.Near-term HDFC Bank stock performance may remain under pressure as investors would like to have more comfort in the management/board after this episode. The upcoming MD & CEO’s renewal in a few months time may also put pressure on stock price performance. While valuation remains attractive given franchise strength, the above highlighted concerns imply a range-bound stock price outcome in the near term, analysts at JM Financial Institutional Securities said.While strategy to accelerate growth along with focus on liabilities remains underway, HDFC Bank is likely to trade weak in near term following the sudden resignation of part time chairman, with impact further amplified by a subdued macro environment amid geopolitical tensions, analysts at ICICI Securities said.=======================================Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.