State Bank of India (SBI) shares are currently undergoing a short-term correction, having fallen 18.29% over the past three months. This downturn has pushed the banking stock towards an oversold zone, with its Relative Strength Index (RSI) registering 31.4. Typically, an RSI below 30 indicates an oversold condition on technical charts.
Several factors have contributed to this decline. Primary among them are the bank's Q3 earnings, persistent margin pressures, and broader sector-specific headwinds. Geopolitical tensions, particularly those between the US and Iran, have also led to profit-booking in the Indian equity market, impacting SBI shares.
Q4 FY26 Earnings and Margin Pressures
The lender recently announced its Q4 FY26 earnings, which fell short of Street expectations. SBI reported a 6% year-on-year rise in standalone net profit for the March quarter, reaching Rs 19,684 crore, up from Rs 18,643 crore in the corresponding period last year. Net interest income (NII), the difference between interest earned and interest paid, increased 4.1% to Rs 44,380 crore from Rs 42,618 crore a year earlier; however, this figure also came in below analysts' estimates.
A significant concern highlighted by investors and analysts is the pressure on net interest margins (NIMs). SBI's domestic NIM slipped to 2.93% in Q4 FY26, down from 3.11% in Q3 FY26 and 3.14% in Q4 FY25. The whole-bank NIM for the quarter stood at 2.81%.
Brokerage Outlook Remains Largely Positive
Despite a mixed Q4 performance, brokerages have largely maintained a positive outlook on State Bank of India. JM Financial, while noting weaker-than-expected margins, retained its bullish stance and a long-term “Buy” rating, setting a March 2027 target price of Rs 1,225. This valuation assigns 1.3 times FY28 estimated adjusted book value to the standalone bank, with an additional Rs 322 per share for subsidiaries and investments.
Motilal Oswal Financial Services also projects a positive trajectory for the stock, forecasting a 28% upside with a target price of Rs 1,300. However, the brokerage adjusted its FY27 and FY28 earnings estimates downwards by 3% and 5% respectively, attributing NIM contraction to repo rate transmission, MCLR cuts, and the migration of certain corporate loans.
Axis Securities revised its price target to Rs 1,285 per share, implying a potential upside of approximately 26% from the current market price. The brokerage highlighted SBI management's guidance for credit growth of 13-15% in FY27, primarily driven by the retail, agriculture, and MSME (RAM) segment, with corporate loan growth expected to remain steady at 12-13%. Axis Securities anticipates SBI will sustain strong credit growth momentum, projecting advances growth at a 14% CAGR over FY26-28, and sees no major downside risks to the bank maintaining a return on assets (RoA) above 1% over the medium term. They continue to view SBI as a preferred pick among large banks, though they cautioned about potential risks from slower systemic credit growth and a higher-than-expected impact from the expected credit loss (ECL) transition.
Disclaimer: This article provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.