Harish Menon, An Economic Consultant says, One of the important reason could be that the asset quality of PSBs could have looked better even the overall deteriorating credit condition in the market.The fact that PSBs are relatively more risk covered in terms of lending could have help their valuation. Private sector banks have been aggressive in the retail sector and this sector noticed a substantial slowdown due to tight monetary conditions created by the central bank.
Over the said period, the Bankex increased by 21.4% or by 1,336.35 points to 7589..96 on April 4 ,2008 from the level of 6253.61 on April 4, 2007. During this period the Sensex increased by 19.99% or 2,556.35 points to 15,343.12 on April 4,2008 from the level of 12,786.77 on April 4,2007.An analyst from a mufual find house said, Public sector banks were quoting at the substantial discount to private sector banks last year and they
got rerated as investors put long PSBs and short private banks trade.The under performance of ICICI Banks also contributed significantly to the private sector banks under performance. The first quarter of the year, however, has seen the Bankex underperform the Sensex as banking stocks have taken a huge beating.
Over the year though, Bank of India registered a 74.9% increase in the market capitalisation, moving from Rs 7,698 crore to Rs 13,463 crore on April 4, 2008.