New Delhi, Nov. 20 -- Public sector banks emerged as hot picks among Dalal Street investors in 2025, with more than the half of the constituents of the Nifty PSU Bank index delivering returns of over 20%.

Investors remain optimistic that a pickup in credit growth, recovery in margins, strengthening asset quality, contained slippages, and normalised credit costs will continue to support earnings momentum and re-rating prospects for the sector.

Sentiment has further improved amid reports that the government is considering allowing direct foreign investment of up to 49% in state-run banks-more than double the current limit-which has fuelled a sustained bull run in PSU banking stocks.

Although the Nifty PSU Bank index closed lower today, i...