SBI shares: Time to buy? After short-term correction, stock heads toward oversold zone

Shares of State Bank of India (SBI) are in a short-term correction. The banking stock has approached the oversold zone with a RSI of 31.4. An RSI below 30 indicates a stock is oversold on charts. The largest bank in India saw its stock fall 18.29% in three months. The primary factor affecting the banking stock has been the Q3 earnings, margin pressures and sector-specific headwinds.

The primary trigger for the stock's correction was a steep fall in its domestic net interest margins (NIM). Margins slipped to 2.93% in Q4 FY26, down from 3.11% in Q3FY26 and 3.14% in Q4FY25.

SBI shares have also seen profit-booking due to the ongoing tensions between the US and Iran as Indian equity market felt the impact of the West Asian conflict.

The lender recently announced its Q4 earnings.  State Bank of India reported March quarter earnings that fell short of Street expectations, with concerns over margin pressure weighing on investor sentiment on Dalal Street.

The country’s largest lender posted a 6% year-on-year rise in standalone net profit for Q4FY26 at Rs 19,684 crore, compared with Rs 18,643 crore in the corresponding quarter last year.

Net interest income (NII) — the difference between interest earned and interest paid — increased 4.1% to Rs 44,380 crore in the March quarter from Rs 42,618 crore a year earlier. However, the NII figure came below analysts’ estimates.

The bank also witnessed pressure on margins during the quarter. SBI’s whole-bank net interest margin (NIM) stood at 2.81% in Q4FY26, while domestic NIM came in at 2.93%. This compares with 3.11% in the December quarter and 3.14% in the year-ago period.

Brokerages remained largely positive on State Bank of India despite a mixed March quarter performance, although some lowered earnings estimates and highlighted margin pressures.

JM Financial said SBI’s margins were weaker than expected in the March quarter, but retained its bullish outlook on the stock. The brokerage maintained its long-term “Buy” rating and March 2027 target price of Rs 1,225, valuing the standalone bank at 1.3 times FY28 estimated adjusted book value (ABV), while assigning Rs 322 per share value to subsidiaries and investments.

Motilal Oswal Financial Services also remained positive on the stock, projecting a 28% upside with a target price of Rs 1,300. However, the brokerage cut its FY27 and FY28 earnings estimates by 3% and 5%, respectively, and expects FY27 return on assets (RoA) and return on equity (RoE) at 1% and 15.3%.

According to Motilal Oswal, SBI reported a mixed quarter as NII declined and net interest margins (NIMs) contracted due to repo rate transmission, MCLR cuts, and the migration of certain corporate loans from MCLR-linked rates to T-bill-linked rates.

Meanwhile, Axis Securities said the bank’s net interest income (NII) and pre-provisioning operating profit came in below expectations. The brokerage revised its price target to Rs 1,285 per share, implying a potential upside of around 26% from the current market price of Rs 1,012.

Axis Securities noted that SBI management has guided for credit growth of 13-15% in FY27, driven mainly by the retail, agriculture and MSME (RAM) segment, while corporate loan growth is expected to remain steady at 12-13%. The brokerage expects SBI to maintain strong credit growth momentum, projecting advances growth at a 14% CAGR over FY26-28.

The brokerage also said it does not foresee major downside risks to SBI sustaining a return on assets (RoA) above 1% over the medium term, and continues to view the lender as its preferred pick among large banks. However, it warned that slower systemic credit growth and a higher-than-expected impact from the expected credit loss (ECL) transition could pose risks to its estimates and target price.