Nifty PSU Bank index falls 4 days in-a-row: Here's why
What's the story
The Nifty Public Sector Undertaking (PSU) Bank index has been on a downward spiral, falling for the fourth consecutive day. The index fell by another 0.6% today after a nearly 4% drop last Friday. Rising bond yields have significantly impacted PSU banks, with India's 10-year bond yield currently at 6.68%, largely due to rising crude oil prices amid the West Asia conflict.
Market dynamics
Impact of rising bond yields on PSU banks
PSU banks usually have a large portfolio of government securities, mostly under the Hold-to-Maturity (HTM) format. However, a considerable portion is also held under the Available For Sale (AFS) form. The rise in bond yields has negatively impacted these banks as it affects their security portfolios. In March alone, the PSU Bank index has fallen by 14%, wiping out all gains made in January and February 2026.
Historical comparison
Worst monthly decline since September 2020
The current downturn is the worst monthly decline for the PSU Bank index since September 2020, when it had fallen by 16%. The index has fallen in eight of the last 10 trading sessions, with all its constituents trading at a loss. The steep decline has pushed three shares, Punjab & Sind Bank, Indian Overseas Bank, and UCO Bank, to a new 52-week low.
Effect
Correction in PSU Bank index
The PSU Bank index, which peaked at 9,918 points on February 26 this year, has corrected by 14% from those levels. The ongoing downturn is a major development in the Indian banking sector and warrants close monitoring for potential future impacts.