Why are PSU Bank Stocks in the Spotlight?

PSU Bank

PSU bank stocks have skyrocketed, leaving the market curious and captivated. But what is propelling their surge?

The markets are buzzing with excitement as the benchmark index, Nifty 50, has smashed previous records and soared to new heights. Yesterday, we delved into the crucial reason driving this remarkable market rally.

Today, we will look at a set of stocks which have emerged as unsung heroes and are among the few fueling this surge. Yes, we are talking about public sector bank stocks. 

Let’s find out the reasons that have transformed them into the beloved darlings of the market rally.

What’s Happening?

The public sector banks (PSU banks) have taken centre stage and have emerged as one of the prime catalysts fueling the ongoing market rally. 

If we look at some numbers, over the past five trading sessions, the benchmark Nifty 50 index has surged by an impressive 2.89%, while the Nifty Bank index has shown a rise of 2.16%. However, the true star of this rally is the Nifty PSU Bank Index, which has outshined all expectations with a staggering surge of 7.97%. 

Why are PSU Banks Stocks Rallying?

According to a report by ICICI Direct, the performance of PSU banks has witnessed a significant upturn, marked by a remarkable 42.1% year-on-year (YoY) growth in earnings. This notable achievement can be attributed to multiple factors, including improving Net Interest Margins (NIMs) and moderation in provisioning. 

In contrast, private sector banks have also demonstrated their strength by delivering a robust earnings growth of 25.8% YoY. However, it is the PSU banks that have truly shined.

According to a recent report by CNBC TV18, the Union Finance Minister Nirmala Sitharaman, recently highlighted that the net profit of public sector banks has witnessed an impressive surge, reaching Rs 1.04 lakh crore in FY23. This significant increase reflects a tripling of the net profit compared to the figures recorded in 2014. 

Overall, the strong P&L performance, healthy net interest margins, and favourable outlook are key drivers behind the remarkable rally observed in PSU banks.

What’s Next?

While the current rally in PSU bank stocks has been impressive, the future performance will depend on a multitude of factors that may affect the broader banking sector and the overall market sentiment.

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

*The article is for information purposes only. This is not an investment advice.

*Disclaimer: https://tejimandi.com/disclaimer  

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