Bad loan recognition likely to weigh on stocks of public sector banks

Earnings improvement over two quarters was without proportionate lending growth

Public sector banks (PSBs), such as State Bank of India, and Punjab National Bank, have been among the top performers on the bourses over the past three months. The Nifty PSU Bank index is up nearly 23 per cent since the beginning of the current calendar year, outperforming the benchmark index Nifty50 by a big margin. For comparison, the Nifty50 is up 4.1 per cent during the period, while Nifty Bank index that is dominated by private sector banks is up 6.5 per cent. 

Analysts attribute this to change in investors sentiment around PSBs. “The recent rally in PSBs is more