PSU banks emerge most resilient in FY26 despite macro headwinds, returns up to 57%

As FY27 begins, a look back at the past year highlights a period marked by global uncertainty and domestic headwinds, with the Nifty 50 falling 5% in the fiscal year ended March 31, 2026. Despite broader market weakness, PSU bank stocks emerged, returning an impressive 27%.

This outperformance has come amid a challenging backdrop for equities. Markets remained under pressure due to tariff concerns, continued sell-off by FIIs, weak earnings growth, higher valuations and a depreciating rupee. These challenges intensified with the escalation of the Iran-Israel/US conflict, which increased energy prices, fueled foreign outflows, and lowered expectations of a US Fed rate cut to just one, below previous estimates of multiple cuts.

Despite broader market pressures, PSU banks remained resilient, supported by improving asset quality, strong balance sheets and sustained credit growth. The sector also benefited from relatively attractive valuations compared to other parts of the market, attracting investor interest amid ongoing volatility.