PSU banks might not be in the limelight unlike fancy private banks, but their performance in FY23 has been stellar. According to a report by Economic Times, PSU bank stocks have delivered up to a staggering 96% return in FY23. Better asset quality, an increase in loan growth, improved margins and controlled credit costs are factors driving the rally.
The Nifty PSU Bank index has shot up by nearly 34.05% in FY23, against the 10.14% increase in the Nifty Private Bank Index. The PSU Bank index has shown relative strength against the benchmark Nifty which has fallen by 2.39% in the same year. UCO Bank, holding the least weightage in the PSU Bank Index, 1.41%, has recorded the highest gains with a 95.8% rally while the index heavyweight SBI, accounting for 30% of the weightage has rallied by 3.4%.
Other than the nation’s largest lender SBI, all other banks have shown double-digit gains. Of the 12 Banks in the PSU Bank Index, Indian Bank stands second with 76% gains, followed by Union Bank of India with 60.3%, Punjab & Sind Bank with 54.7%, Bank of India with 50.6%, Bank of Baroda with 44.5%, Bank of Maharashtra with 40.1%, Punjab National Bank with 30%, Central Bank of India 24.8%, Central Bank 21.7%, and Indian Overseas Bank with 19% according to the report.
While the gains of the PSU banks have been among the top gainers in the market, the recent turbulence in the market with global geo-political tensions, consequent rate hikes by the RBI and rising inflation have cut short the PSU Banks' rally. The past 3 months have been unfavourable to the PSU banks with the Index losing around 15% of its value as investors remained concerned over the PSU Bank’s debt exposure to the falling Adani Group stocks and global banking turmoil.
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