Old risks, new enthusiasm

Summary: PSU banks spent a decade destroying wealth, then spent three years recovering it. Investors who missed the recovery are now eyeing the sector. The question worth asking is which part of the cycle you're actually buying into.

Summary: PSU banks spent a decade destroying wealth, then spent three years recovering it. Investors who missed the recovery are now eyeing the sector. The question worth asking is which part of the cycle you're actually buying into. Public sector banks are having their moment in the sun. After years of being the sector that investors stayed clear of, they are suddenly back in vogue. Returns have been strong, headlines have been flattering and enthusiasm is running high. But before you get carried away, it is worth asking a question that is easily overlooked when a sector is hot: what does the long-term picture actually look like? Recent numbers look quite impressive Let us start with the good news. In the one year ending March 30, 2026, the Nifty PSU Bank index has rallied nearly 33 per cent. In comparison, the Nifty 500, proxy for the broader market, returned -2.9 per cent. Stretch it to five years and the staggering outperformance remains. The PSU bank index has grown nearly 32 per cent annually against the broader index’s 11.9 per cent. These are strong numbers no doubt, especially at a time when most broad market indices have been flat or in the red. Looking at them alone will have you thinking that PSU banks are one of the finest investment ideas in the market right now. But d