ALSO READNifty PSU Bank index zooms 21% on government's Rs 2.11-lakh crore recapitalisation plan PSU banks under pressure; PNB, Andhra Bank down 5% PSBs in focus; Andhra Bank, Syndicate Bank, PNB up 5% PSU bank recapitalisation: Analysts concerned about budgetary support Nifty PSU Bank index hits 9-month low
The PSU bank index recorded its sharpest single day gain, was trading at its highest level since March 4, 2015. At 01:37 PM; the Nifty PSU Bank index was up 28% at 3,949, as compared to 0.78% rise in the benchmark Nifty50 index.
Punjab National Bank (PNB), Canara Bank, Bank of India and Union Bank of India were up more than 30% each. State Bank of India (SBI), Oriental Bank of Commerce and Bank of Baroda were up in the range of 25% to 30% on the NSE.
The combined market capitalization (market-cap) rose by over Rs 1-lakh crore in single day, post a huge rally in PSU Banks. India’s largest lender SBI and other PSU lenders in terms of market-cap added nearly Rs 1.10-lakh crore to stock investors’ wealth.
SBI added more than Rs 57,446 crore in its market-cap in Wednesday's session alone. PNB added Rs 11,225 crore, while Bank of Baroda (Rs 9,263 crore), Canara Bank (Rs 6,289 crore) and Bank of India (Rs 5,194 crore) added market-cap in the range of Rs 5,000 crore to Rs 10,000 crore.
Moody's Investors Service says that the Indian government's (Baa3, Positive) announcement of a Rs 2.1 trillion recapitalization plan for public sector banks is a credit positive for the sector.
"The quantum of the plan is large enough to comprehensively address these banks' weak capitalization levels and is a significant credit positive as weak capitalization is the main credit weakness for most rated public sector banks," says Srikanth Vadlamani, a Moody's Vice President and Senior Credit Officer.
"For the 11 rated public sector banks, Moody's estimates that their external capital requirements over the next two years would be around Rs 700-950 billion, factoring in the two main drivers of their capital needs - the need to comply with Basel 3 requirements, and for conservative recognition and provisioning of their asset quality problems," says Vadlamani.
"Thus, even if only the recapitalization bonds and the already announced budgetary support are factored in, the announced capital infusion by the government should be able to comfortably address the capital requirements of the public sector banks," says Vadlamani.
|Price on BSE in Rs||M-cap in Rs cr|
|Bank of Baroda||143.15||183.35||28.1||42,247||9,263|
|Bank of India||140.45||184.3||31.2||21,831||5,194|
|Union Bank (I)||131.35||172.05||31.0||12,498||2,957|
|I O B||22.45||26.4||17.6||7,531||1,127|
|United Bank (I)||17.70||20.85||17.8||3,256||492|
|Bank of Maha||25.30||29||14.6||3,646||465|
|J & K Bank||73.90||82.05||11.0||4,569||454|
|Pun. & Sind Bank||46.45||52.75||13.6||2,112||252|
|Total market-cap gain||109,861|
|LTP : Last traded price at 1:36 PM|