Nifty PSU Bank index down 6%; SBI, BOB fall over 5%

Nifty PSU Bank index was down 6.4% as compared to 1.6% fall in the Nifty 50 index at 03:05 PM.

Shares of public sector undertaking (PSU) banks were down up to 7%, erasing most of their previous day’s gains.

State Bank of India (SBI), Bank of Baroda (BOB), Syndicate Bank, Punjab National Bank (PNB), Union Bank of India and Oriental Bank of Commerce were down more than 5% each, while Canara Bank, Bank of India (BOI) and Allahabad Bank down 3%-5% on the National Stock Exchange (NSE).

At 03:05 PM, Nifty PSU Bank index was down 6.4% as compared to 1.6% fall in the Nifty 50 index. On Monday, the PSU bank index rallied 10% against 2.6% rise in the benchmark index.

Among the individual stocks, SBI, the largest loser, was down 7% at Rs 157 after media report suggests that the bank chairman Arundhati Bhattacharya reiterated that the financial sector's struggle with non-performing assets (NPAs) will continue. CLICK HERE TO READ FULL REPORT. On Monday, the stock gained 8% on the NSE.

BOB too slipped 6% to Rs 131 on profit booking. Yesterday, the stock surged 22%, recorded its biggest single day gain, after the management emphasized that the bank will not raise fresh equity (not even from the government) for the next 18-24 months and as such there was no risk of dilution.

Compelled to recognise weak assets as non performing assets (NPAs) and create adequate provisions to cover them, all PSBs posted a sharp drop in net profit with BOB and BOI reporting huge losses in Q3FY16.

“It’s not the end of the tunnel yet as all PSBs (barring BOB) has extended the recognition of RBI-identified weak accounts as NPAs to Q4. While fresh restructuring was limited, fresh slippages spiked to an all-time high with nearly 50-70% arising out of RBI’s asset quality review. Banks also continued with 5:25 and SDR restructuring, which kept fresh impairments at elevated levels,” Religare Institutional Research said in a report.