CNX PSU Bank index records sharpest single-day gain since May 2014

The CNX PSU Bank index rallied 6.19% or 216 points to close at 3,699 compared to a 0.48% decline in the CNX Nifty today.

The CNX PSU Bank index, the National Stock Exchange (NSE)'s public sector undertaking (PSU) banking shares index, registered its sharpest single-day gain in the past 15 months after the Union finance ministry unveiled a plan called Indradhanush to revamp struggling public sector banks or PSBs. 

The CNX PSU Bank index rallied by 6.19% or 216 points to close at 3,699 compared to a 0.48% decline in the CNX Nifty today.

The government has filled key posts, which have been lying vacant for a year in some cases, appointing a managing director and chief executive officer (MD & CEO) as well as non-executive chairmen for five PSBs. Two MDs and three chairmen are from the private sector.

Earlier, in May 23, 2014, the PSU bank index had surged by 8.12% or 300 points due to growing investor confidence that newly elected Prime Minister Narendra Modi will take steps to boost economic growth.

On May 11, 2015, the CNX PSU Bank index had jumped by 6.16% or 203 points after the market price of Bank of Baroda zoomed 17% on the back of an improvement in asset quality for the quarter ended March 2015.

Today, shares of Bank of Baroda closed higher by 15% to Rs 212 after the bank said the central government, after consultation with the Reserve Bank of India, has appointed Shri P. S. Jayakumar, MD and CEO of VBHC Value Home Pvt. Ltd as head of the bank.

Canara Bank ended 13% higher at Rs 345 after the government appointed Rakesh Sharma, as MD & CEO of the bank on 14 August 2015.

Apart from these two, the Financial Services Secretary Hasmukh Adhia announced names of MD and CEOs of Bank of India, IDBI Bank and Punjab National Bank.

Among other banking names, Bank of India soared by 8.5% to Rs 185, IDBI Bank surged by 6.5% at Rs 70.50 and Punjab National Bank strengthened by 3.6% at Rs 172 on the NSE.

Oriental Bank of Commerce, Union Bank of India, Allahabad Bank, Andhra Bank, Indian Overseas Bank and State Bank of India are among other PSU banks to gain 4%-6% on the NSE during the day.

The government's move to help revitalise the public sector banks under its 'Indradhanush' programme is a welcome step. The appointment of CMDs and non-executive chairman and a time frame for the creation of Bank Board Bureau (BBB) are new announcements. BBB would streamline the selection process and reduce the time taken to appoint heads of PSBs, said Shreyash Devalkar, Fund Manager – Equities, BNP Paribas Mutual Fund.

The government is also looking at giving flexibility to banks for hiring middle level management and considering performance-based employee stock options plan (ESOP) for senior management, which is long-term positive. The key pain points in balance sheet asset quality are already identified and we look forward to comprehensive plan to de-stress the balance sheets of state-owned enterprise (SOE) banks, Devalkar added.

Meanwhile, the CNX PSU Bank index has rallied by 11.75% in the past three trading sessions compared to a 1.53% gain in the CNX Nifty.

	Price on NSE in Rs
Bank	14 Aug,15	17 Aug,15	%chg
Bank of Baroda	184.40	212.80	15.4
Canara Bank	305.65	346.70	13.4
Bank of India	170.20	185.75	9.1
IDBI Bank	66.20	70.75	6.9
Oriental Bank	171.00	181.15	5.9
CNX Nifty	8518.55	8477.30	-0.48