PSU Banks Gear Up For Capital Raising As Govt Pushes MPS Norms — SEBI Analyst Sees Nifty PSU Bank Rally Toward 8,000

Public sector banks gained momentum after M Nagaraju, secretary of the Department of Financial Services (DFS), said on Wednesday that four state-run lenders will be raising capital this year to comply with the Securities and Exchange Board of India’s minimum public shareholding (MPS) norm.

Of the 12 PSU banks, Indian Overseas Bank, Punjab Sind Bank, UCO Bank, and Central Bank of India currently have government stakes close to or above 90% at the end of the June quarter.  The banks recently raised between ₹1,500 crore and ₹2,000 crore each through a QIP, which only marginally diluted the government’s stake.

Nagaraju said the fresh capital raising will help bring public shareholding below 75%, while also providing additional funds for lending. He added that credit growth has been very strong, supported by last year’s profits, and said low inflation and system liquidity will allow banks to lend more. 

The secretary also clarified that the government will retain majority ownership in PSU banks, with no plan to reduce its stake below 51%.

Technical Outlook

SEBI-registered analyst Finkhoz said the Nifty PSU Bank index has given a clean breakout above 7,200 after weeks of consolidation, with a weekly close above this zone seen as key. 

They noted the relative strength index (RSI) is at 61, leaving room for further upside, while the next resistance zone lies at 7,600–7,800 and support remains strong at 6,700.

The index is trading comfortably above its 50 exponential moving average (EMA) at 6,375 and 200 EMA at 5,004, keeping the long-term trend bullish.

Earnings And Macro Tailwinds

Finkhoz highlighted that the breakout is supported by earnings momentum, S&P’s August upgrade of SBI, Union Bank, and Indian Bank, and macro tailwinds such as GST rate cuts, festive demand, and the recent CRR cut. 

They pointed out that asset quality has remained stable, with a gross non-performing assets (GNPA) ratio in check and a PCR of around 75–90%, while treasury gains have offset some pressure on NIMs.

Analyst’s View

Finkhoz said top PSU picks remain SBI, Canara Bank and Indian Bank, adding that if the index sustains above 7,200, the rally could extend towards 7,800–8,000, with the trend staying bullish as long as 6,700 support holds. 

In the analyst’s words, “PSU banks are finally moving from ‘cheap’ to ‘strong’ zone.”

What Is The Retail Mood?

On Stocktwits, retail sentiment for the Nifty PSU Bank index was ‘bullish’ amid ‘normal’ message volume.

Nifty PSU Bank index is flat so far in 2025.

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