PSU Bank Stocks: Mixed Trends, Stronger Fundamentals, But Volatility Ahead for 2026

• PSU bank stocks showed mixed performance on Dec 29, with Nifty PSU Bank gaining marginally, though 5 of 12 stocks closed green.
• Experts note PSU banks' improved asset quality, capital adequacy, and balance sheets, but expect near-term volatility and valuation consolidation.
• The sector saw a significant rally and valuation re-rating in 2025 due to cleaned-up books, low NPAs, strong loan demand, and government support.
• Pravesh Gaur warns that returns may normalize in 2026 as re-rating is factored in, making stock-specific selection crucial.
• Long-term investors should focus on PSU banks with consistent profit growth, strong capital buffers, and lending discipline for 2026.

Why It Matters: PSU banks have stronger fundamentals, but 2026 demands careful stock selection amid expected volatility.