Mumbai: Shares of public sector banks (PSU banks) saw heavy selling on Friday, March 27. Many stocks fell up to 5 percent during the day.
Bank of Baroda dropped the most, falling 4.8 percent to Rs 259.5. Canara Bank, Punjab National Bank, Punjab & Sind Bank, and UCO Bank also declined over 4 percent. Other banks like SBI, Union Bank, and Bank of India fell between 2 percent and 3.5 percent.
Bond Yields Rise to Multi-Month High
The main reason behind the fall is a sharp rise in bond yields. India’s 10-year bond yield jumped to 6.9 percent, its highest level since July 2024.
Higher bond yields mean higher borrowing costs in the economy, which creates pressure on banking stocks.
Fiscal Concerns Add to Pressure
The government’s recent decision to cut excise duty on petrol and diesel has increased worries about the fiscal deficit.
Investors fear that lower tax collections may impact government finances in the long term. At the same time, the government plans to borrow Rs 17.2 lakh crore in FY27, which adds to market concerns.
Impact on Bank Earnings
Rising yields may not directly impact banks’ lending income, but they affect treasury operations.
Banks invest in bonds, and when yields rise, bond prices fall. This leads to mark-to-market losses in their portfolios, which can reduce profits and create volatility.
Global Factors Driving Yields Higher
Global developments are also pushing yields up. Crude oil prices remain above USD 100 per barrel due to the ongoing West Asia conflict.
Tensions between the US, Israel, and Iran, along with uncertainty around the Strait of Hormuz, have increased fears of inflation and slower growth.
Index and Stock Performance
The Nifty PSU Bank index fell 3.6 percent to 8,266 during the session. It is now down about 3 percent in 2026 and nearly 17 percent from its recent peak.
Several PSU bank stocks have seen sharp declines this year. Punjab & Sind Bank is down 21 percent, while UCO Bank, Canara Bank, and PNB have fallen over 15 percent.
The PSU banking sector, which performed well in 2025, is now under pressure. Rising bond yields, fiscal concerns, and global uncertainties are affecting investor sentiment.
Unless yields stabilise, PSU bank stocks may continue to remain volatile.
Disclaimer: This article is for informational purposes only and not financial advice. Market movements are subject to change. Investors should consult certified advisors before making any investment decisions or trading in stocks.
