India's stock market rally is increasingly being driven by earnings rather than sentiment, according to Trust Mutual Fund's Chief Investment Officer Mihir Vora. As reported by CNBC TV18, with broader markets outperforming and mid- and smallcap indices scaling new highs, investors are rewarding sectors that have delivered strong quarterly numbers while punishing those facing earnings downgrades. The divergence between largecap and broader markets reflects the underlying earnings picture, with large private banks, NBFCs and energy companies seeing earnings pressure weighing on benchmark indices. Capital goods, consumer discretionary and pharmaceuticals - which have higher representation in mid- and small-cap indices - continue to outperform, demonstrating that stock movements are closely tracking sector-wise earnings trends. Latest data shows the Nifty PSU Bank index trades at a P/E of about 8.41, making it attractive compared to individual PSU bank valuations, with Bank of India trading at a P/E of 6.5x indicating potential undervaluation.
State Bank of India's shares fell 6.66% to ₹1,019 on Friday, marking one of the sharpest intraday falls seen in recent times and hitting their lowest level in a month. The decline erased ₹67,040 crore in market capitalisation and dragged the lender's valuation below the ₹10 lakh crore mark to ₹9.41 lakh crore. Despite strong credit growth and improved asset quality, margin pressure and lower profitability led to earnings below market expectations. SBI reported a consolidated net profit of ₹19,684 crore for Q4 FY26, registering a 5.58% year-on-year growth, though it declined 6.39% sequentially due to margin pressure. Net interest income increased by 4.13% YoY to ₹44,380 crore, but declined 1.35% QoQ, reflecting moderation in core profitability. The whole bank NIM for Q4 FY26 stood at 2.81%, down 18 bps QoQ, while domestic NIM declined to 2.93%, highlighting persistent margin compression challenges.
PSU banking stocks gained attention post Q4 FY26 earnings, with State Bank of India, Punjab National Bank, Bank of Baroda, and Bank of India showing mixed profit growth. According to reports from LiveMint, while all four major public sector lenders reported healthy earnings, investors are now focusing more on asset quality, margin trends, and long-term business strength rather than just headline earnings numbers. The mixed market reaction reflects varying investor sentiment across the sector despite uniform profit growth, with Trust Mutual Fund's Vora noting that banks have emerged as an area of caution as lenders have underwhelmed on margins despite signs of improving credit growth. Bank of India's net profit surged 82.5% year-on-year to ₹2,626 crore in Q4, supported by net interest income growth of 2.1% to ₹6,063 crore, though the bank faces significant margin pressure and rising funding costs.
SBI's asset quality continued to improve in the March quarter, with the Gross NPA ratio declining to 1.49% and Net NPA remaining low at 0.39%, both at multi-decade lows. The credit cost moderated to 0.27%, though slippages saw a slight increase to 0.47%. According to SMC Global Securities, the provision coverage ratio stood at 74.36%, while capital adequacy improved sharply to 15.40%, strengthening the bank's growth and risk absorption capacity going forward. Whole bank advances increased 16.87% YoY and 5.32% QoQ, supported by strong domestic and overseas performance, with domestic advances growing 16.33% YoY and foreign office advances rising 20.01% YoY. Deposit mobilisation remained stable, with whole bank deposits rising 11.03% YoY and CASA deposits growing 9.53% YoY, while the CASA ratio improved by 33 bps QoQ to 39.46%, indicating stable low-cost deposit accretion.
SBI shares appear technically weak, showing fading upward momentum with key support seen around the 50-week EMA near ₹972. According to Lakshmishree's Anshul Jain, the stock is sustaining itself below key daily moving averages, while the post-result negative reaction reflects weakening institutional participation. "Price action suggests a gradual drift toward the 50-week EMA placed near 972, which now emerges as a critical support zone. Unless SBI reclaims its short-term resistance band with strong volumes, rallies are likely to face selling pressure," he added. A breakdown below ₹972 could accelerate downside momentum, while only sustained closing strength above recent swing highs would negate the bearish setup. SBI announced a dividend of ₹17.35 per share for FY2026, with the record date set for May 16, 2026 and payment date of June 4, 2026.
