HDFC Bank, ICICI Bank, SBI in focus ahead of Budget 2026 as capex signals loom

Capex push, RBI stance and liquidity measures to guide banking stocks

• Bank stocks face volatility ahead of Budget 2026 amid global trade tensions
• Budget hints on fiscal deficit, capex, borrowing may boost banking sector.
• Analysts expect capex push, credit guarantees, and MSME relief in Budget 2026

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HDFC Bank, ICICI Bank, SBI, Kotak Mahindra Bank, Axis Bank and Federal Bank head into Budget Day at a delicate juncture. After a steady rally through most of 2025, driven by reasonable valuations, improving asset quality and stable earnings, the sector has seen momentum fade at the start of 2026 amid global trade tensions, tariff-related uncertainty and mixed December-quarter results.

So far this year, HDFC Bank and Kotak Mahindra Bank shares have been down nearly 7 percent each, while ICICI Bank has delivered marginal gains. In contrast, SBI, Bank of Baroda, Axis Bank and Federal Bank are up around 8 percent.

RBI policy: status quo in Feb, easing later in the year?

Most economists expect the RBI to maintain a pause in its February policy meeting, but a neutral stance could keep the door open for rate cuts later in 2026. Analysts believe the timing and extent of easing will be closely linked to Budget 2026 signals on the government’s borrowing programme and capital expenditure plans.

For banking stocks, the Budget’s fiscal cues could prove pivotal. A credible fiscal deficit path, manageable borrowing numbers and sustained capex thrust would help keep bond yields in check, improve liquidity transmission and give the RBI greater comfort to ease policy without unsettling debt markets, setting the stage for a relief rally in bank stocks.

What the banking industry wants from Budget 2026

According to analysts at Axis Securities, the banking sector’s Budget 2026 wishlist is firmly centred around growth visibility, credit flow support and targeted liquidity measures.

Capex-led growth to revive corporate credit

Axis Securities expects the government to maintain a strong thrust on capital expenditure, which could act as a key trigger for reviving corporate credit growth. A sustained capex push would not only support loan demand for banks but also improve asset quality visibility over the medium term.

Support for MFI-NBFCs via credit guarantees

Analysts also expect a large, one-time microfinance credit guarantee scheme for NBFCs, aimed at strengthening MFI-NBFC balance sheets. Such a move could improve access to funding, ease liquidity pressures and ensure continued lending to low-income households.

MSME relief amid tariff headwinds

With global trade and tariff-related uncertainties weighing on exporters, Axis Securities expects targeted measures to make working-capital loans more affordable for MSMEs and export-oriented firms. A dedicated refinancing window for NBFCs and wider credit-guarantee coverage would be closely watched, as these steps could help cushion the impact of tariff headwinds while supporting credit flow to vulnerable segments.

Rate cuts: growth supportive, margins in focus

While rate cuts are generally positive for credit growth and asset quality, margin defence remains the key variable for banks. December-quarter results suggested that private lenders have so far managed to protect margins despite cumulative rate cuts, aided by CRR benefits and deposit repricing.

The full impact of the December rate cut is expected to play out in the March quarter, which could weigh on asset yields. However, continued repricing of term deposits and easing funding costs should offer partial support. Banks such as HDFC Bank and Federal Bank have stepped up low-cost CASA mobilisation, while others like RBL Bank have leaned on fixed-rate loans to lock in yields.

What lies ahead for bank stocks?

Analysts cautioned that any further rate cuts could put incremental pressure on net interest margins, even as credit growth remains orderly. That said, sector fundamentals remain intact as there are no major earnings downgrade risks, asset quality trends are supportive and credit demand is gradually improving.

As Budget 2026 unfolds, investors are likely to track large private banks for margin stability, PSU banks for growth visibility, and mid-sized lenders for execution in a softer rate environment, with fiscal signals expected to set the near-term direction for banking stocks.