CNX PSU Bank Index surges over 6% in two days

SBI, Union Bank of India, Canara Bank, Oriental Bank, Bank of India, Bank of Baroda and PNB are up 3-6% on the NSE.

Shares of public sector undertaking (PSU) banks are trading higher for second consecutive day after Goldman Sachs upgraded ratings of state-owned banks.

State Bank of India (SBI), Union Bank of India, Canara Bank, Oriental Bank of Commerce, Bank of India, Bank of Baroda and Punjab National Bank are up 3% to 6% on the National Stock Exchange (NSE).

The NSE PSU bank index CNX PSU Bank index, the largest gainer among sectoral indices, up 3% at 2,690 compared less than 1% rise each in benchmark CNX Nifty and Bank Nifty at 0930 hours.

CNX PSU Bank index has rallied 6.5% in past two trading sessions as against 1.1% rise in CNX Nifty.

A global investment bank expects that the stress asset quality should reduce for public sector banks including SBI, Bank of Baroda and Punjab National Bank. Hence they should see a gradual reduction in stress loans on lower slippages as well as higher recoveries.

Meanwhile, the Reserve Bank of India (RBI) has extended deadline for banks to implement global capital norms, Basel III, by a year to March 2019 on concerns of potential stresses on the asset quality and profitability of the banks.

The transitional period for full implementation of Basel III Capital Regulations in India is extended up to March 31, 2019, instead of as on March 31, 2018, RBI said in a notification.

The move to extend Basel III implementation deadline is positive for Banks (especially PSU banks) as it provides a leeway for Banks already grappled with asset quality stress, says analyst at Angel Broking in a client note.

Among the individual stocks, Union Bank of India has surged 6% to Rs 129 on the NSE. Allahabad Bank, Canara Bank, Bank of India and Oriental Bank of Commerce have rallied 4% each, while SBI, Bank of Baroda and Punjab National Bank are up 3% each.