Here's why shares of Indian Bank are declining despite the PSU Bank outperformance

Shares of state run Indian Bank Ltd. are trading with losses of over 2% on Tuesday, December 2, bucking the trend on a day when most of its peers, and the PSU Bank index are trading with gains.

The move on the downside comes after the latest heavyweight weightage guidelines issued by the NSE last evening, which would have an impact on indices such as the Nifty Bank. The resultant rejig will lead to Yes Bank and Union Bank likely to enter the index from the end of this month, but Indian Bank's name is not part of that list.

This is only the second instance in the last seven sessions that the Indian Bank stock has declined.

Indian Bank was touted to be an inclusion to the Nifty Bank index by Nuvama Alternative & Quantative Research, in its note, earlier in November. The potential Nifty Bank inclusion, along with FII headroom and a potential MSCI inclusion in February 2026 were cited as the three most important triggers for the state-run lenders.

Shares of Indian Bank are up 63.5% so far in 2025. The stock has been delivering positive annual returns since 2020. In the last five years, the stock is up nearly 10x in value.

Indian Bank, along with other PSU lenders have also outperformed their private banking peers this year, over reports of consolidation within the PSU Banking space. However, the Ministry of Finance, in a written reply to the Lok Sabha on Monday, said that no such proposal is currently under consideration before them.

Shares of Indian Bank are currently trading 2.4% lower on Tuesday at ₹866.1. The stock is down 3% from its recent 52-week high of ₹894.