The index that shone

Summary: Even as broader markets struggled, PSU stocks stood out with strong gains. Their performance reflects a shift that investors took time to recognise, but the real test may still lie ahead. The Indian stock market has had a forgettable year. The Sensex is barely above where it was 12 months ago. Mid and small caps have corrected sharply. And yet, the BSE PSU index has delivered strong double-digit returns over the same period. For investors conditioned to think of public sector companies as slow, bureaucratic and perpetually disappointing, this needs explaining. The short answer is that a small number of PSU businesses had already fixed themselves. The market just took a long time to notice. A banking system back from the dead The dominant force behind the index’s performance is PSU banks, and the story here is not a small one. For the better part of a decade, India’s government-owned banks were in genuine crisis. They had lent recklessly to infrastructure projects in the 2000s, many of which collapsed. The bad loans piled up, were hidden, and then finally forced into the open. Banks stopped lending. Profits evaporated. The government spent hundreds of crores recapitalising institutions that seemed to have a l

This article was originally published on April 01, 2026.