Shares of major lenders continued their upward momentum on Thursday, September 18, boosting the Nifty Bank index to its 12th consecutive session of gains. The index rose 0.61% to 55,835, marking its highest level in a month.
Bank of Baroda led the rally with a 2.6% jump to an intraday peak of ₹252.25, while HDFC Bank and AU Small Finance Bank advanced over 1% each. By 11:50 a.m., 11 of the 12 constituents of the index were trading in positive territory.
The rebound comes after two months of weakness, when banking shares closed July and August lower. September, however, has seen a sharp reversal, with the sector already up 4% this month. This renewed strength has also helped the broader Nifty 50 cross 25,400, delivering a 4.10% monthly gain so far.
What’s Fueling the Rally
Analysts attribute the rally to multiple supportive factors:
- Revival hopes in credit demand, despite recent moderation.
- Limited fiscal impact from GST rate cuts, easing market concerns.
- Softening bond yields, after the U.S. Federal Reserve trimmed its policy rate by 25 basis points. India’s 10-year benchmark G-Sec yield slipped to 6.50% on Thursday.
- Government commitment to fiscal discipline, with Finance Minister Nirmala Sitharaman reaffirming the 4.4% fiscal deficit target for FY26, reducing fears of additional borrowing.
Sector Outlook
Credit growth has cooled to 10% year-on-year, weighed down by slower demand in retail and corporate lending. However, brokerages expect GST and income tax relief measures to provide a demand boost in the second half of FY26.
Motilal Oswal forecasts credit expansion of 11% in FY26 and 13% in FY27, though it warns of near-term profitability pressures due to tighter margins and stress in unsecured retail loans, MSMEs, and commercial vehicle financing. Deposit repricing and phased CRR cuts are expected to ease funding costs and aid margins going forward.
Earnings growth is projected to improve gradually, with the brokerage estimating a recovery to 18.4% in FY27, compared with muted growth of around 3% expected this year.
Key Movers Close to Yearly Highs
While several index stocks have already touched fresh 52-week highs in 2025, State Bank of India and Bank of Baroda are inching closer. SBI now trades just 2.06% below its December 2024 peak of ₹874.45, while Bank of Baroda is about 6% short of its one-year high of ₹266.95.