PSU bank stocks rise up to 5% today: Check key factors aiding the rally

Shares of major public sector banks rallied up to 5% on Friday, aided by multiple factors despite a subdued sentiment in the broader market.

The Nifty PSU Bank Index settled at 8,184.35 with a gain of 125.6 points or 1.56%, while the benchmark Nifty50 ended 155.75 points or 0.6% lower at 25,722.1. Among the Nifty PSU Bank constituents, Union Bank, Canara Bank, Punjab National Bank and Bank of Baroda were top gainers.

A positive sentiment over Q2FY26 results of the public sector lenders and the SEBI’s new rules for Bank Nifty contributed to the upward momentum in stock prices. As per the new norms, the Bank Index is likely to have 14 constituents as against the current 12. As per a CNBC-Awaaz report, Yes Bank, Indian Bank, Union Bank and Bank of India could be in the fray for inclusion.

Further, the speculations about a potential merger of Union Bank and Bank of India fuelled the rally. There are also speculations around an increase in the FDI (Foreign Direct Investment) limit in PSUs from 20% currently to up to 49%.

Canara Bank’s stock jumped 4.3% on October 31, 2025, trading almost 3% higher during the closing session, led by a healthy loan book growth, marked at 13.7% as compared to a growth guidance of 10% to 11% year-on-year (YoY). The bank’s deposit growth was delivered at 13% YoY compared to a guidance of 9-10% YoY, in the second quarter of the financial year 2026.

Further, the Karnataka-based public sector lender reported a growth in profit after tax (PAT) by 19% YoY, while the Return on Assets (ROA) stood at 1.1% in Q2 FY26.

Shares of Bank of Maharashtra (BoM) gained up to 4.6% on Friday, while closing over 1% higher in the session. A rally in the stock was seen after the bank’s advances grew by 15.3% YoY in the quarter ended September 30, 2025, while deposits grew by 14.1% YoY during the period.

The bank’s net profit jumped 23% YoY in the quarter under focus, while the Return on Assets expanded 2 basis points (bps) to 1.8%.

Indian Overseas Bank’s shares rose up to 3.2% in the session, closing the day on a positive note, led by a strong 58% YoY growth in Q2 net profit. Its ROA expanded sharply by 6 bps quarter-on-quarter (QoQ) to 1.2%. The bank’s loan growth also increased 20% YoY in the second quarter.

Bank of India’s shares gained up to 3% on Friday. The stock settled in the green on the back of a net profit growth of almost 8% YoY in Q2 FY26, along with a loan growth of 14% YoY in the period under review.