Motilal Oswal Analyst Identifies PSU Banking Stocks as Attractive Investment Opportunities

Indian Banking Sector: A Long-Term Opportunity

Despite the recent sharp decline in the Indian stock market, the Nifty Bank index has lost 11% in March, with the Nifty Private Bank index down 11% and the PSU Bank index losing over 13% this month. The main reason behind this decline is bond price volatility, which has led to mark-to-market (MTM) losses on banks' bond portfolios.

However, Nandish Shah, AVP–PCG Research and Advisory at Motilal Oswal Financial Services, is bullish on the Indian banking sector. Shah expects credit growth to sustain at a healthy 14% CAGR over FY26-28E, driven by retail, increased SME and corporate demand, and a revival in consumption.

Top PSU Banking Stocks to Buy

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Based on Shah's analysis, the following PSU banking stocks are recommended for long-term investment:

Punjab National Bank (PNB)

• Current market price: ₹111.70
• Target price: ₹145
• Upside potential: 30%

PNB's structural recovery story remains intact, supported by steady balance-sheet strengthening, improving asset quality, strong provision buffers, and normalised credit costs.

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State Bank of India (SBI)

• Current market price: ₹1,046.80
• Target price: ₹1,300
• Upside potential: 24%

SBI delivered a strong all-round performance in Q3FY26, driven by robust business growth, margin expansion, and healthy asset quality.

Indian Bank

• Current market price: ₹874
• Target price: ₹1,025
• Upside potential: 17%

Indian Bank delivered an in-line Q3FY26 performance with PAT of ₹30.6 billion, up 7% YoY, driven by steady margins and healthy loan growth.