SBI, HDFC Bank, ICICI Bank: How are financial stocks doing post-Budget 2026, and what's in it for the sector?

Sitharaman presented her ninth consecutive Union Budget on Sunday.

While major PSU banks continued to trade in the negative territory in the opening session on Monday, shares of private lenders saw marginal gains as investors assessed the Budget 2026 announcement on fiscal consolidation and banking reforms.

At 10:46 am, the Nifty PSU Bank index was down 1.58% at 8,382.55, while the Nifty Private Bank index was almost flat at 28,208.1, up 0.01%.

The broader Nifty Financial Services index also edged lower, down 0.09% at 27,774.1. The Nifty Bank index was down 0.31% at 58,235.9.

On Sunday, the benchmark Nifty 50 settled 1.96% lower at 24,825, while the BSE Sensex plunged more than 1,500 to settle at 80,723, following the Budget announcement.

The sharp fall in benchmark indices was triggered by a massive sell-off after a hike in Securities Transaction Tax (STT) on derivatives and no relief on capital gains. In Budget 2026, Sitharaman increased the STT on futures to 0.05% and options to 0.15% to prevent risky bets by traders.

Stock performance on Monday

On Monday, banking stocks showed mixed movements in early trade. Shares of major PSU lenders declined in early trade. Punjab National Bank stock declined 1.63%, Union Bank 1.25%, and Bank of Baroda 2.7% on the NSE at around 10:40 am.

The largest public sector lender, the State Bank of India, was also down more than 2.5%. However, private banks were relatively stable, with ICICI Bank and Kotak Mahindra Bank shares trading 0.69% higher each.

HDFC Bank shares were up 0.61%, while Axis Bank stock dropped 1.07% and AU Small Finance Bank declined 1.58%.

Budget 2026: Key announcements

In Budget 2026, the fiscal deficit is projected at 4.3% of GDP in BE 2026-27, slightly lower than 4.4% in RE 2025-26, following the government’s debt consolidation path.

The Budget outlined key measures for banks and NBFCs, including credit expansion under the “Viksit Bharat” vision.

The hike in capital expenditure to ₹12.2 lakh crore for FY 2026-27 is expected to bolster corporate lending, while schemes like the Guarantee Emergency Credit Line (GECL) continue for MSMEs.

Sitharaman said, “I propose forming a high-level committee on banking for Viksit Bharat to comprehensively review the sector and align it with India's next phase of growth, while ensuring financial stability, inclusion, and consumer protection.”

What analysts at Citi say

Meanwhile, Citi, in its Budget analysis report, outlined that the fiscal deficit is budgeted at 4.3% of GDP, with gross market borrowings expected at ₹17.2 trillion, indicating potential pressure on bond yields.

The financial sector is set for reforms, with a high-level committee formed to guide banks toward the next phase of growth under the Viksit Bharat vision, while NBFCs have clear credit disbursement targets.

The Guarantee Emergency Credit Line (GECL) for MSME loans continues at ₹90 billion.

The Budget also announced restructuring of PFC and REC, though expected measures such as urban affordable housing boosts and tax incentives for deposits were not included, the Citibank report mentioned.