Which PSU Bank To Lead Next Market Leg? | Credit Growth & Re-Rating Story Strong

The PSU banking rally continues to be one of the strongest trades in the Indian equity market, delivering 29% YTD returns, significantly outperforming private banks. According to market expert Ashish Chaturmohta, the sector’s strength is backed by solid fundamentals, not sentiment alone. Credit growth in PSU banks has now exceeded private banks, with segments like MSME and personal lending showing sharp traction-touching 13-15% growth this year. Operational metrics including net NPA and slippage ratios are now comparable to private peers, while valuations remain deeply discounted at 0.8–1x Price-to-Book, versus 2.5–2.7x for private banks. This creates strong potential for re-rating. Ashish remains overweight on PSU banks, preferring PSU Bank BEES ETF and highlighting SBI as the top individual pick, with a target of ₹1,250–₹1,300 ahead.