Banking stocks 2026: Nifty rally, ECL norms, targets

Market opens firmer as banks support benchmarks

Indian equities traded higher with banking stocks helping the broader tone. Nifty was seen near its day’s high, holding above the 24,500 mark with gains of 167 points. Sensex was up 653 points in the same window. The move came alongside weekly expiry positioning, which often increases intraday flows in index-heavy names. Market participants also tracked whether the index could sustain levels into the close.

Nifty clears a key level near 24,400

A crucial resistance zone around 24,400 was highlighted as an important pivot for the day. Nifty was reported to have crossed that area and was trading around 24,530. The emphasis, however, stayed on confirmation through the closing print rather than only an intraday move. Such levels tend to matter during expiry sessions because option strikes cluster around round numbers. The recovery back towards 24,500 was cited as evidence that markets were gradually rejecting near-term doubts.

Bank Nifty returns above 57,000 on earnings comfort

Bank Nifty moved back above 57,000 and traded around 57,215, up nearly 630 points. The support was attributed to “good results” coming in from both private sector lenders and PSU banks. With banks carrying heavy weight in the benchmarks, this helped Sensex and Nifty hold up on the day. Traders typically watch Bank Nifty leadership closely during index moves, especially when the broader market is also steady.

Volatility gauge stays in mid-teens

India VIX was referenced around 17.70, indicating volatility was not at extreme levels even as weekly expiry approached. A mid-teens VIX often signals that risk pricing is present but not panicked. For short-term traders, this matters because implied volatility influences option premiums and strike behaviour. For investors, it can also provide a quick read on whether the market is bracing for a sharp event-driven move.

Banking stock screen: valuations and ratings snapshot

A market screen dated 4 March 2026 listed large lenders and select mid-sized banks with their CMP, market cap, price-to-book (P/B) and ratings. These are point-in-time figures and can differ from other price references cited elsewhere in the provided material. Still, the table captures how the market is pricing major banks relative to book value, which is a common yardstick for lenders.

HDFC Bank and Axis Bank: key points highlighted

HDFC Bank was described as one of the best banking stocks in India, with emphasis on asset quality and consistency. Its GNPA and NNPA were cited at 1.24% and 0.33%, respectively, noted as the lowest among the top 10 bank stocks referenced. The same section cited 4% year-on-year growth in Q3 PAT, and 3% growth in deposits and 1% growth in advances between Q4FY24 and Q2FY25.

Axis Bank also featured in brokerage commentary. Nomura highlighted Axis Bank as its top pick, and noted management’s stance of 300-400 bps above-industry growth in steady state. Nomura’s FY26F loan growth estimate was cited at 14% YoY, with a target price of ₹1,440. It also flagged that Axis needs a “clean quarter” on asset quality to bridge valuation gaps with larger peers, given elevated credit costs in FY26 to date due to technical and one-time provisioning impacts.

Broker calls: targets, buys, adds and a sell

JM Financial listed multiple ratings across banks and set target prices for several names. It had a ‘buy’ rating on ICICI Bank (₹1,550), Axis Bank (₹1,400), SBI (₹1,210), City Union Bank (₹280), DCB Bank (₹200) and Ujjivan Small Finance Bank (₹66). It also carried ‘add’ ratings on names including HDFC Bank (₹850), Kotak Mahindra Bank (₹390), Federal Bank (₹290), Bandhan Bank (₹160), Bank of Baroda (₹280), Punjab National Bank (₹115) and AU Small Finance Bank (₹950).

Systematix also published targets, including ICICI Bank (₹1,630), Bank of Baroda (₹330), Kotak Mahindra Bank (₹475), HDFC Bank (₹960), SBI (₹1,300), Axis Bank (₹1,530) and Federal Bank (₹310), while maintaining a ‘hold’ rating on Indian Bank (₹990) and IndusInd Bank (₹890). Separately, the material noted YES Bank as the only lender with a ‘sell’ rating and a target price of ₹16.

RBI’s draft ECL framework: timeline and core mechanics

A key regulatory development was the Reserve Bank of India’s draft guidelines on the Expected Credit Loss (ECL) framework, proposed to take effect from April 1, 2027. The transition includes a phased glide path through FY2032 and shifts provisioning from an incurred-loss approach to a forward-looking model. The framework introduces a three-stage classification of assets: Stage 1 (performing), Stage 2 (underperforming) and Stage 3 (credit-impaired).

The draft considers ‘30 DPD’ (days past due) as a marker for significant increase in credit risk (SICR). For Stage 1, banks recognise 12-month ECL, while for Stage 2 and Stage 3, banks recognise lifetime ECL. Regulatory floors were referenced, including 0.25% to 1.25% for Stage 1 and 25% to 100% for Stage 3 assets. Banks have been asked to develop internal models incorporating macro-economic forecasts, with governance involving independent validation and board oversight.

Who may feel higher provisioning pressure

Analysts said large private sector banks such as HDFC, ICICI and Axis, and public sector banks, are relatively well positioned due to underwriting strength, secured retail-heavy portfolios and contingent buffers. Motilal Oswal said top private banks are positioned for a smoother transition with minimal capital or P&L impact, supported by high contingent provisions. ICICI Securities noted systemic provision coverage ratio (PCR) above 75% is healthy, and flagged HDFC, Axis, SBI and KVB as having healthy contingent buffers for a smooth transition.

At the same time, multiple notes cautioned that banks with higher exposure to unsecured and microfinance (MFI) loans may face a higher provisioning burden. Macquarie Research said PSU bank transition should be smooth given time provided, but it expects the earnings impact could be higher than private sector banks from FY28. Emkay Research added that reduced risk weights under the new standardised approach for credit risk could ease capital burn in the long term, particularly in MSMEs and retail segments like housing and cards, and said the new norms would benefit HDFC Bank, ICICI Bank and SBI Card.

What investors are tracking into Budget Day and rate outlook

The material noted that large banks such as HDFC Bank, ICICI Bank, SBI, Kotak Mahindra Bank, Axis Bank and Federal Bank head into Budget Day at a “delicate juncture”. It also highlighted divergent year-to-date performance: HDFC Bank and Kotak Mahindra Bank were down nearly 7% each, while ICICI Bank delivered marginal gains, and SBI, Bank of Baroda, Axis Bank and Federal Bank were up around 8%.

On policy, most economists in the material expected the RBI to maintain a pause in its February meeting, while a neutral stance could keep the door open for rate cuts later in 2026. As Budget 2026 unfolds, the stated focus areas included margin stability for large private banks, growth visibility for PSU banks, and execution for mid-sized lenders in a potentially softer rate environment.

Conclusion

The session’s tone stayed positive with Nifty above 24,500 and Bank Nifty back over 57,000, helped by banking-led support. Alongside near-term expiry-driven positioning, investors have a clear medium-term marker in the RBI’s proposed ECL shift from April 2027 and the transition roadmap through FY2032. Broker targets and ratings continue to shape stock-specific attention, but provisioning sensitivity and loan-mix exposure remain central to how the market will assess banks as the draft norms evolve.