State-run banks’ shares outperform private peers on recovery bets

Shares of India’s state-owned banks are outperforming their private peers after 12 straight years of underperformance, with gains fueled by capital raising and optimism over potential stake sales by the government in some banks.

A gauge of public sector lenders has surged 39 per cent so far in 2021, as a broad improvement in the sector’s asset quality and India’s plans to transfer soured loans to a proposed bad bank boosts their growth outlook.

“Raising money gives you confidence that valuations will catch up and balance sheet can be cleaned,” said Siddharth Purohit, an analyst with SMC Global Securities.

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