Indian banking stocks continued to trade higher for the fourth straight session on Friday, January 02, as sentiment towards the sector strengthened following the release of December quarter updates of select banks, improving credit demand, and expectations of strong performance in Q3FY26.
The Nifty Bank index rose 0.73% to reach a fresh record high of 60,152, surpassing the previous peak of 60,114, registered on December 01.
With today’s rally, the index has shot up by 2% in just four trading sessions. Among individual stocks today, Yes Bank led the rally with a surge of 3.7% to the day’s high of ₹22.27 apiece, while Union Bank and IndusInd Bank surged 2% and 1.5%, respectively.
Other stocks such as Punjab National Bank, ICICI Bank, Bank of Baroda, State Bank of India, and HDFC Bank also traded higher, with gains of over 1%.
The rally also supported the front-line indices, boosting the Nifty 50 and Sensex, each with a 0.60% gain.
Anshul Jain, Head of Research at Lakshmishree, said that Bank Nifty is trading at all-time highs and is on the verge of confirming a six-week box breakout with a decisive close above 60,150.
The rally has originated cleanly from rising daily and weekly moving averages, which are now acting as a strong launchpad for trend continuation. Price structure shows higher lows intact, signaling fresh long build-up rather than exhaustion, opined the analyst.
“Participation data indicates a mix of new longs and short covering by FIIs, adding fuel to the move. If the breakout sustains, momentum can extend toward the 61,000 zone over the coming weeks. Risk remains favourable as long as the index holds above the breakout base. Failure to sustain above 60,150 would delay, not derail, the broader bullish setup.”
Meanwhile, on Thursday, three banks, South Indian Bank Ltd., Indian Bank Ltd., and Punjab & Sind Bank, released their December quarter business updates. Indian Bank’s numbers came in higher than their guidance, while Punjab & Sind Bank’s results were within the guided range. South Indian Bank’s third-quarter update was mixed, as reported by CNBC TV-18.
Meanwhile, system credit growth has improved. As per the latest fortnightly data (15th Dec 2025), system credit growth rose to 12% YoY (vs. 11.5% YoY on 28th Nov 2025), while deposit growth moderated to 9.4% YoY (vs. 10.2% YoY on 28th Nov 2025).
RBI’s sectoral credit data for November 2025 indicated an uptick in overall system credit growth to 11.4% YoY (from 11.1%/10.2% YoY in Oct/Sep 2025), led by stronger momentum across industry, retail, and services, according to domestic brokerage firm JM Financial.
In addition, the RBI’s recently released bi-annual Financial Stability Report (FSR) points to improving trends in headline asset quality numbers across India’s financial sector.
Strong credit momentum and easing cost of funds to support Q3 performance: JM Financial
JM Financial expects a solid performance from the banking sector in the December quarter, driven by stronger credit momentum, easing cost of funds pressure, and improving asset quality trends.
Mirroring sectoral trends, the brokerage estimates that the credit growth of its coverage universe of 17 banks should pick up to 11.8% YoY, while deposit growth remains lower at around 10.2% YoY (9.7% YoY in 2Q), resulting in a higher CD ratio of 85% (vs. 84% in 2Q).
However, JM Financial notes that the additional 25-basis-point repo rate cut announced in December 2025 will have a negative impact on NIMs, but only in 4QFY26/1QFY27. Despite some seasonality, the 3Q NIM outlook for banks looks relatively better, aided by the full impact of CRR cuts.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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