CNX PSU Bank index hits three-year high

Allahabad Bank,Union Bank and Oriental Bank are up 3% each, while Canara Bank, IOB, BOI, PNB and SBI are up 1-2%.

Shares of public sector undertaking (PSU) banks are in demand with the National Stock Exchange (NSE) CNX PSU Bank index hit a three-year high on hopes that the softening in bond yields may lead to treasury gains on bond portfolios.

At 1155 hours, CNX PSU Bank index was up 0.92% at 4,316 as compared to 0.06% decline in the benchmark CNX Nifty. The banking index hit a high of 4,340, its highest level since May 2011, during intra-day trade on NSE.

Among the individual stocks, Allahabad Bank, Union Bank of India and Oriental Bank of Commerce are up 3% each. Canara Bank, Indian Overseas Bank, Bank of India, Syndicate Bank, Punjab National Bank and State Bank of India (SBI) are up 1-2%.

“The Reserve Bank of India (RBI) has clearly guided to a roadmap of an accommodative policy going ahead and the easing of the interest rate trajectory would result in a healthy appreciation in SBI bond portfolio which would partially compensate for the provisioning requirements on its advances book (i.e. non-performing assets [NPAs]),” analyst at Sharekhan said in a report.