Bank of Baroda, Canara Bank, Punjab National Bank, and UCO Bank were among the PSU lenders that witnessed heavy selling in Friday’s session (March 27), reacting to a sharp rise in bond yields.
The Indian surged to 6.9%, extending gains to its highest level since July 2024, as a combination of fiscal pressures, energy shocks, and heavy debt supply pushed borrowing costs higher.
Additionally, the recent excise duty cut on petrol and diesel has heightened concerns over the fiscal deficit and long-term fiscal sustainability, further raising investor anxiety.
emerged as the top laggard, falling 4.8% to ₹259.5 apiece. It was followed by Canara Bank, Punjab National Bank, Punjab & Sind Bank, and UCO Bank, all of which declined over 4%.
Other lenders—including , , Bank of India, Union Bank of India, Indian Overseas Bank, State Bank of India, and Bank of Maharashtra—fell between 2% and 3.5%.
Amid the broad-based sell-off, the Nifty PSU Bank index dropped sharply by 3.6% to an intraday low of 8,266. The decline has dragged the index down about 3% so far in 2026 and nearly 17% from its recent peak.
In a bid to ease pressure from rising crude oil prices—driven by the ongoing US-Israel-Iran conflict—the government on Friday , reducing petrol duty to ₹3 per liter and eliminating it on diesel. Meanwhile, the windfall tax on diesel exports was raised to ₹21.5 per liter.
While rising bond yields may have a limited direct impact on banks’ net interest margins, they could weigh on treasury performance. Higher yields typically lead to mark-to-market losses on available-for-sale and trading portfolios, creating volatility in treasury income.
This becomes more significant in an environment where yields are expected to remain elevated amid higher government borrowing and a reduced likelihood of policy rate cuts. In the recent Union Budget, the government proposed a record gross market borrowing of ₹17.2 lakh crore for FY27.
Meanwhile, crude oil prices remain elevated, with Brent crude holding above $100 per barrel as traders grow increasingly sceptical about the prospects of a US-Iran ceasefire to end the month-long conflict.
US President Donald Trump said he would extend the pause on potential attacks on Iran’s energy infrastructure by 10 days, adding that talks with Tehran had gone “very well.” This follows his earlier decision to halt strikes for five days.
However, hostilities persist, with Israel continuing missile strikes on Iran, while Tehran has intensified its attacks across the Gulf region and tightened its grip on the Strait of Hormuz. The prolonged conflict has rattled global markets, fuelling fears of higher inflation and slower economic growth.
7 PSU bank stocks fall up to 21% in 2026 so far
The PSU banking pack, which emerged as a top performer in 2025, has lost momentum in recent weeks, largely due to rising bond yields. Seven of the 15 constituents of the Nifty PSU Bank index have declined between 10% and 21% so far in 2026.
has fallen the most, down 21% to ₹21.87. UCO Bank, Canara Bank, and Punjab National Bank have dropped over 15% each during the same period. Meanwhile, Bank of Baroda, Central Bank of India, and Indian Overseas Bank have declined more than 10%.
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