Nifty PSU Bank

What is Nifty PSU Bank?

The Nifty PSU Bank index tracks the performance of public sector banks (PSBs) listed on the National Stock Exchange. These banks are majority-owned by the Government of India and play a pivotal role in the country’s financial infrastructure. The index consists of 12 PSBs, including major players like State Bank of India, Bank of Baroda, and Canara Bank. Nifty PSU Bank is a sectoral index, making it ideal for investors who want focused exposure to government-owned banking institutions. The performance of this index is closely linked to macroeconomic factors such as credit growth, interest rate cycles, fiscal policies, and regulatory changes.

Since PSBs often lead in implementing financial inclusion initiatives and are instrumental in public lending schemes, the index also reflects policy-driven momentum. While these banks may be perceived as less efficient than private banks, they offer long-term potential, especially during periods of economic recovery or banking sector reform. Nifty PSU Bank serves as a benchmark for ETFs and mutual funds focused on the public banking sector.

Nifty PSU Bank selection criteria

The Nifty PSU Bank index includes 12 public sector banks selected from the universe of listed and traded stocks on the NSE. To be eligible, a bank must be majority-owned by the Government of India and classified under the PSU banking sector. Selection is based on free-float market capitalisation and average daily turnover over a six-month period. Banks must also meet minimum trading history and liquidity requirements.

The index ensures that only actively traded and sizable PSBs are included to maintain transparency and investability. It is reviewed semi-annually, typically in March and September, to incorporate any changes such as mergers, divestments, or new listings. The index does not impose sectoral caps since all constituents belong to the same sector, but it does rebalance to prevent over-concentration in any single stock.

How is the Nifty PSU Bank index calculated?

The index uses the free-float market capitalisation-weighted method, wherein each bank’s weight is proportional to its market capitalisation adjusted for public shareholding. The base date is January 1, 2004, and the base value is 1000. It is calculated and updated in real time during trading hours based on live prices. At the time of rebalancing, weights may be capped to prevent dominance by any single entity. NSE Indices Ltd manages the maintenance and periodic reconstitution of the index. The use of free float ensures the index reflects true market dynamics and investability. Given the government’s ongoing efforts to strengthen the public banking system, the index serves as a vital indicator of confidence in the PSU banking segment.