Government Bank Shares Plummet Post-Budget: Record Borrowing Sparks Sell-off

• The Nifty fell over 250 points after the budget announcement, with the government bank index declining by approximately 4%.
• All 12 stocks in the government bank index traded lower, with Bank of India down over 6% and SBI over 3%.
• The government announced a record gross borrowing of ₹17.2 lakh crore for FY27, significantly higher than market expectations.
• Higher government borrowing increases bond supply, potentially raising bond yields and causing mark-to-market losses for PSU banks.
• PSU banks hold a large proportion of government bonds, making them vulnerable to rising bond yields, leading to investor sell-offs.

Why It Matters: Record government borrowing post-budget led to a sharp decline in PSU bank shares due to fears of rising bond yields.