Rally in PSU banks set to continue; biz prospects may improve further in H2

Banks have delivered a standout performance in the July-September quarter of 2022-23 financial year (Q2FY23) despite generally lackluster results across the stock market. Within the sector, PSU banks have outperformed the private sector in terms of share price returns.
 

There are several reasons for the good banking performance. There’s been credit expansion and credit costs have remained low, due to general economic growth and low non-performing assets (NPAs).
 

The Reserve Bank of India (RBI) started hiking interest rates in May 2022 but one could argue that policy rates remain very low, or negative, compared to prevailing levels of inflation. In