State Bank of India Stock Flashes Overbought as Rally Continues

State Bank of India shares (NSE:SBIN) have moved into overbought territory, propelled by a year-to-date rally of 20.23%, signaling a robust bullish trend in the public sector banking giant. The stock's Relative Strength Index (RSI) has reached 76.2, a level that typically indicates the asset may be overvalued and due for a correction.

SBI's stock performance has been exceptional, achieving a new 52-week high of ₹971.15 on November 6,. This milestone underscores the bank's commanding position within the financial sector. The stock has consistently traded above its key moving averages – 5-day, 20-day, 50-day, 100-day, and 200-day – reflecting sustained positive market momentum. Over the past year, SBI's stock has gained 12.67%, significantly outpacing the Sensex's 4.01% increase during the same period, highlighting investor confidence in the bank's strategic direction.

The bank's strong Q2 financial performance, ending September 30, 2025, further fueled the upward trajectory. SBI reported a net profit of ₹201.6 billion, a 10% year-on-year increase, primarily driven by a one-time gain of ₹45.93 billion from the sale of a 13.2% stake in Yes Bank to Sumitomo Mitsui Banking Corporation. Net interest income also saw a rise of 3.3% to ₹429.84 billion, exceeding analyst expectations. Importantly, the bank's gross non-performing asset (NPA) ratio improved to 1.73% from 1.83% in the previous quarter, indicating enhanced asset quality and improved financial health.

Strategic Divestments and Future Outlook

SBI's strategic divestment of a 13.2% stake in Yes Bank to Sumitomo Mitsui Banking Corporation for ₹88.89 billion not only boosted its financial position but also demonstrated confidence in the Indian banking sector. This move contributed significantly to the one-time gain in the recent quarter, further positively influencing investor sentiment.

Looking ahead, the Indian government's proposal to increase the foreign investment cap in state-run banks from 20% to 49% is expected to attract more overseas capital. This policy change aims to align public sector banks with their private counterparts, potentially enhancing capital availability for institutions like SBI and further strengthening their market position.

SBI's plan to sell a 6.3% stake in SBI Funds Management through an initial public offering (IPO) represents another strategic move to unlock value. This marks the bank's second attempt after a previous plan in 2021. The fund management company, jointly owned by SBI (61.9%) and French asset manager Amundi (36.4%), manages assets worth ₹120 billion. The IPO is expected to attract considerable investor interest, contributing to the positive outlook for SBI's stock.

Recent regulatory changes are also expected to support growth. The Reserve Bank of India's decision to lift restrictions on acquisition financing by banks is anticipated to bolster India's real economy. This allows banks like SBI to fund acquisitions, potentially leading to increased lending and growth opportunities.

While SBI's stock has entered overbought territory, suggesting the possibility of a near-term correction, the underlying fundamentals and strategic initiatives continue to inspire investor confidence. The bank's strong financial results, strategic divestments, favorable policy changes, and proactive growth initiatives collectively paint a picture of sustained positive momentum.