State Bank of India reclaimed its position as the country's second-most valuable bank by market capitalisation on Tuesday, overtaking ICICI Bank for the first time in more than six years as a sustained rally in public sector bank stocks drew fresh foreign institutional investment.

SBI's market cap stood at ₹9.60 trillion compared to ICICI Bank's ₹9.57 trillion in morning trade on January 27, 2026, according to BSE data reported by Business Standard. The state-run lender last held this position on August 6, 2019, when its valuation stood at ₹2.69 trillion against ICICI Bank's ₹2.65 trillion. HDFC Bank remains India's most valuable bank with a market cap of ₹14.16 trillion.

Foreign Investors Drive PSU Bank Rally

The reversal in fortunes reflects a broader institutional pivot toward public sector banks. Foreign institutional investors raised their stake in SBI to 10.34% in the December 2025 quarter, the highest level in a year, up from 9.57% in September 2025. The buying spree extended across the sector, with FIIs increasing positions in 10 of 12 PSU banks as the group added ₹4.5 lakh crore in market capitalisation over the past year.

SBI has outperformed its private sector rivals by a wide margin in recent months. The stock has gained 6% in January 2026, compared with declines of 7.2% for HDFC Bank and 0.3% for ICICI Bank during the same period. Over six months, SBI surged 31%, while ICICI Bank fell 10.2% and HDFC Bank dropped 8.6%.

The stock touched a record high of ₹1,055.35 on January 22, 2026, pushing its market cap toward ₹10 trillion.

Analysts Cite Stronger Fundamentals

Motilal Oswal Financial Services noted that SBI has delivered strong performance supported by steady business and revenue growth alongside well-contained credit costs. The bank is guiding for 13-14% loan growth in FY26, led primarily by the retail, agriculture, and MSME segments, with net interest margin outlook remaining unchanged at above 3%.

S&P Global Ratings has forecast SBI's return on assets will stay at 0.9%-1.0% over the next two years, supported by the bank's contained credit costs amid a benign credit cycle in India.

"For the first time in over a decade, PSU banks are also growing their loan books faster than private sector banks, indicating that they are regaining market share and customer confidence," said Manish Srivastava, Executive Director at Anand Rathi Wealth Limited.

Indian equity markets rebounded on Tuesday after falling in early trade, with the Sensex and Nifty recovering to trade in positive territory. SBI was among the gainers on the 30-share index.