government bank
Shares of public sector (government) banks have shown the biggest return of this year. The market cap of these banks has increased by ₹ 2.3 lakh crore in just two months. This rise has again raised questions in the market. Is this just a short-term bull run or the beginning of a new bull run (long-term bull run) for public sector banks?
The Nifty PSU Bank index has gained nearly 20% since August, and is up nearly 46% from the March low. Now the total market value of all government banks has reached around ₹ 18 lakh crore. This surge is related to the improving conditions of the banking sector, support from government policies and increasing interest of foreign investors.
Which banks came out ahead?
- Indian Bank gave returns of up to 26% in two months.
- Bank of India and Canara Bank rose by more than 20%.
- SBI, PNB and Bank of Baroda have also increased by 1416%.
- This means that even in a cautious environment, public sector banks have become among the best performing stocks of 2025.
Potential raise of $4 billion
If the government increases the foreign investment (FII) limit from 20% to 49%, then up to $4 billion (about ₹ 33,000 crore) can come into public sector banks. According to the report of Nuvama Institutional Equities, if this happens, a new rise of up to 2030% can be seen in the shares of PSU banks. According to the report, if the limit is increased, then investment can reach up to $2.2 billion in SBI, $459 million in Indian Bank, $362 million in Bank of Baroda, $355 million in PNB, $305 million in Canara Bank and $294 million in Union Bank. The government wants that foreign investors should be allowed to hold up to 49% stake, but the government will maintain its 51% stake.
Increasing interest of foreign investors
Recently Emirates NBD of Dubai invested $3 billion in RBL Bank. Japan’s Sumitomo Mitsui invested $1.6 billion in Yes Bank and further increased its stake. This shows that foreign investors are increasingly showing interest in Indian banks.
Will this momentum last?
Shibani Sircar Kurien of Kotak Mahindra AMC believes that there are still good opportunities in big public sector banks. The earnings of these banks can increase due to increase in retail loans and reduction in the cost of deposits. “Bank valuations are still attractive, especially compared to past records,” he said. At the same time, Vishnu Kant Upadhyay of Master Capital Services says that many public sector banks are still showing strong chart patterns and are preparing to make new highs, but Seshadri Sen of MK Global believes that this bullishness will not last long. He said, the results will be good in the next few months, but there may be pressure on banks’ earnings by FY27. Due to wage negotiations and declining treasury income.