New Delhi, March 26 -- Banking stocks have witnessed a sharp decline, in line with the broader Indian stock market, since the onset of the US-Iran war in the Middle East. The Bank Nifty index has fallen 10% over the past month and is down more than 12% on a year-to-date (YTD) basis. In comparison, the benchmark Nifty 50 has declined over 8% in the last month and nearly 11% YTD.

Within the banking space, PSU banks have underperformed their private sector peers, consistent with trends observed during previous market corrections. The Nifty PSU Bank index has dropped 16%, while the Nifty Private Bank index has declined 14.5% over the past month.

After this correction, analysts believe the banking sector valuations have turned more reasonabl...