The average returns from banking sector schemes were 16.80% so far in 2022 as against 17.8% of the benchmark Bank Nifty index. The Nifty PSU Bank index has jumped 51.6% and the Nifty Private Bank index has gained 17.6% in this period.
Among shares of top PSU banks, SBI has surged 30.5%,
has jumped 98%, has advanced 52% and has soared 46%, buoyed by a strong set of numbers. Net profit of all public sector banks in the September quarter surged 50% from the same period a year ago.
Actively managed banking funds manage investor money to the tune of ₹22,000 crore across 15 schemes. Most of them largely stuck to private sector banks like , Ltd, , and . While most of them had exposure to and Bank of Baroda in PSU banks, their allocation to smaller banks was relatively small.
Money managers and analysts say it has been a catch-up rally for PSU banks, which have underperformed private lenders for over a decade.
“PSU banks were a tactical play as there was a valuation mismatch compared to private sector banks. This has shrunk post the rally in PSU banks,” said Azeem Ahmad, head (PMS),
Mutual Fund.
Ahmad said net interest margins (NIMs) for PSU banks in the quarter ended September 30 were high, as they did not raise deposit rates in line with rising repo rates. However, with deposit rates going up, there could be some pressure on NIMs over the next two quarters.
Some analysts are sceptical about the longer-term outlook for PSU banks as they continue to lose market share to their private sector counterparts.
“PSU banks have been losing market share in loans and also deposits; especially CASA deposits market share loss has been sharper at 400 bps in the last four years,” said Suresh Ganapathy, associate director, Macquarie Capital.
Ganapathy said PSU banks are at best a good trade because valuations are cheap.
