Nifty PSU Bank Index Jumps 2% as SBI Hits New High: Why Public Sector Banks Are in Demand

Public sector bank shares were strong on Tuesday, with the Nifty PSU Bank index rising 2% in trade, much higher than the modest 0.25% gain in Nifty 50. SBI led the rally, touching a record high of ₹988.95, gaining about 2%. The stock has climbed 9% over the past month, while the Nifty 50 has remained largely flat.

Other major gainers included Indian Bank, Bank of Maharashtra, Bank of Baroda, Central Bank of India and Canara Bank, all rising between 2% and 3%.

Why PSU Banks Are in Demand?

RBI Signals Possible Rate Cuts

RBI Governor Sanjay Malhotra said there is still room for future interest rate cuts, depending on the December policy review. Recent inflation numbers support this possibility.

Although rate cuts can temporarily reduce banks’ net interest margins (NIMs), the overall pressure is expected to be offset by:

• Better deposit repricing
• Liquidity support from the recent CRR cut
• Improved loan growth

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Conclusion

PSU banks are gaining investor confidence due to supportive signals from the RBI, improving financial health, strong loan growth, and attractive valuations. 

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