PSU banks still attractive despite rally; metals in secular upcycle, says Sudip Bandyopadhyay

Core Viewpoint - The valuation gap between Public Sector Undertaking (PSU) banks and private lenders remains significant, presenting attractive long-term investment opportunities despite recent rallies in the PSU Banking Index [1][2][8]. PSU Banks - The re-rating story for PSU banks is not over, with a meaningful valuation gap still existing compared to private peers [2][8]. - State Bank of India (SBI) is highlighted as a core long-term portfolio candidate due to improving asset quality, steady credit growth, strong subsidiary performance, and potential value unlocking through subsidiary listings [8]. - Other PSU banks like Bank of Baroda and Union Bank of India are also considered attractive, supported by improving return ratios and positive management commentary on credit growth [8]. - The banking sector, particularly PSU banks, is noted to be relatively insulated from global uncertainties and AI-led disruptions [5][8]. Private Banks - While PSU banks are preferred at current levels, selective private banks are also showing promise, with Bandhan Bank experiencing signs of recovery after asset quality stress [6][8]. - Among large private banks, ICICI Bank is favored for long-term investment despite some one-off impacts in recent results, while Axis Bank could see valuation catch-up potential [6][8]. Metals Sector - The metals sector is described as being in a "secular upcycle," driven by global trends rather than India-specific factors, despite recent volatility in silver prices and pressures on stocks like Hindustan Zinc [7][9]. - The long-term outlook for metals remains positive, supported by global demand trends and corporate value-unlocking triggers [9]. - Vedanta is reiterated as a positive investment due to ongoing demerger plans that could unlock shareholder value alongside the broader metal cycle [9].