Shares of public sector banks such as SBI, Canara Bank, Bank of Baroda, Bank of India and others came under sharp selling pressure on Sunday, February 1, sliding as much as 8.6% after Finance Minister Nirmala Sitharaman presented the Union Budget 2026. Reflecting the broad-based weakness, the Nifty PSU Bank index ended the session down 5.6%.

Bank of India emerged as the worst performer, plunging nearly 9% to close at Rs 150 per share. Indian Bank followed with an 8% decline, while Bank of Baroda and Bank of Maharashtra fell 6.9% and 6.5%, respectively. Union Bank of India ended the day 6.3% lower, while SBI and Canara Bank both slipped 5%. Central Bank of India, Punjab National Bank and Indian Overseas Bank lost around 3% each, with UCO Bank limiting losses to about 2.5%.

The sell-off comes from the government’s borrowing programme. The Centre has announced plans to borrow a record Rs 17.2 lakh crore from the market in FY2026–27, raising fears of upward pressure on bond yields.

Rising yields are typically negative for PSU banks as they lead to mark-to-market losses on bond portfolios held in their treasury books. With bond markets shut on Budget day while equities remained open, investors appeared to price in this risk aggressively. Trading in the bond and currency markets is set to resume on Monday, which could provide further clarity on yield movements.

In the Budget, Nirmala Sitharaman doubled down on the government’s infrastructure-led growth strategy in the Union Budget 2026, proposing a sharp increase in capital expenditure to Rs 12.2 lakh crore for FY2026–27, up from Rs 11.2 lakh crore in the current fiscal.

On the macroeconomic front, the government projected GDP growth of 7.4% for the current financial year, with inflation expected to stay close to 2%. The fiscal deficit was pegged at 4.4% of GDP, signalling continued commitment to fiscal consolidation even as public spending remains elevated.

Also read: Capex push, STT increase and Budget fineprint for stock market: Will Sensex, Nifty fall further in days ahead?The Budget underscored the scale of India’s public investment cycle over the past decade, with capital expenditure rising more than fivefold from Rs 2 lakh crore in 2014–15 to Rs 11.2 lakh crore in the FY2025–26 Budget Estimates. Sitharaman reiterated that infrastructure creation would remain a priority, particularly in cities with populations above five lakh, including fast-growing tier-2 and tier-3 urban centres.

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