Jump of 2.3 lakh crore in 2 months! PSU banks' biggest comeback in 2025
PSU banks' biggest comeback in 2025: Public sector bank shares have made the biggest comeback this year. In just two months, their market cap has increased by ₹2.3 lakh crore. This surge has once again raised questions in the market: Is this just a temporary rally or the beginning of a new bull run for public sector banks?
According to a report by Nuvama Institutional Equities, if this happens, PSU bank shares could see a surge of up to 20-30%.
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The Nifty PSU Bank Index has risen nearly 20% since August, and is now up nearly 46% from its March lows. The total market value of all public sector banks has now reached approximately ₹18 lakh crore. This surge is linked to the improving conditions of the banking sector, support from government policies, and increased interest from foreign investors.
Which banks have outperformed?
Indian Bank delivered a 26% return in two months.
Bank of India and Canara Bank gained more than 20%.
SBI, PNB, and Bank of Baroda also gained 1416%.
This means that even in a cautious environment, public sector banks have become one of the best-performing stocks of 2025.
Potential Gain of $4 Billion
If the government increases the foreign investment (FII) limit from 20% to 49%, up to $4 billion (approximately ₹33,000 crore) could flow into public sector banks. According to a report by Nuvma Institutional Equities, if this happens, PSU bank shares could see a surge of up to 20-30%.
According to the report, if the limit is increased, investments could reach $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 to allow foreign investors to hold up to 49%, but the government will retain its 51% stake.
Growing Foreign Investor Interest
Recently, Dubai's Emirates NBD 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 rally last?
Shibani Sircar Kurien of Kotak Mahindra AMC believes that large public sector banks still offer good opportunities. Increased retail lending and lower deposit costs could boost their earnings. She said, "Bank valuations are still attractive, especially compared to previous records."
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