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PSU Banks Rally: A 25% Surge Ignites Investor Interest
25 Nov
Summary
- Nifty PSU Bank Index experienced a significant 25.2% rise over the past year.
- Several major fund houses offer ETFs tracking this high-performing index.
- Improving asset quality and declining NPAs fuel public sector banks' growth.
Public sector banks have seen a remarkable resurgence over the past year, with the Nifty PSU Bank Index soaring by 25.2%. This significant growth has not gone unnoticed by the investment community, as evidenced by the numerous exchange-traded funds (ETFs) launched by prominent fund houses like Nippon India, Kotak, and HDFC to track this index.
The impressive performance is underpinned by a marked improvement in the financial health of these institutions. Key factors contributing to this upturn include enhanced asset quality and a substantial reduction in non-performing assets (NPAs) over recent quarters. These improvements have positioned PSU banks favorably against their private counterparts.
Adding to their strengthening position, PSU banks are now exhibiting higher credit growth rates compared to private banks. This robust performance, coupled with a reduction in funding costs due to policy rate adjustments and lower cash reserve ratios, signals a positive and dynamic outlook for the public sector banking sector.
