PSBs extend gain on privatisation hope; Indian Bank surges 37% in 4 days

In past four trading days, Nifty PSU Bank index has rallied 18 per cent as compared to a 9 per cent gain in the benchmark Nifty50

Shares of public sector banks (PSBs) continued their upward movement for the fourth straight day on Thursday after the government on Monday announced plans to privatise two PSU banks in the financial year 2021-22 (FY22).

At 02:18 pm, Nifty PSU Bank index was up 3 per cent as compared to a less than 1 per cent gain each in Nifty50, Nifty Bank and Nifty Private Bank indices. In the past four trading days, Nifty PSU Bank index has rallied 18 per cent as compared to a 9 per cent gain in the benchmark Nifty50.

Indian Bank hit a 52-week high of Rs 120, up 18 per cent on the NSE in intra-day trade on the back of heavy volumes. The stock has rallied 37 per cent in the past four trading days. Currently, it was trading 14 per cent higher at Rs 116 with a combined 30 million shares having changed hands on the NSE and BSE so far.

Canara Bank rose 6 per cent to Rs 162, up 22 per cent in the last four, while Bank of India was up 7 per cent to Rs 57.95 today, having gained 16 per cent thus far in the week. Punjab National Bank and Bank of Baroda soared 23 per cent and 19 per cent, respectively, during the same period.

Financial sector stocks, especially banks, have been in the limelight since Finance Minister Nirmala Sitharaman proposed to divest stake in two PSBs while unveiling Budget 2021 proposals. That apart, the FM set aside Rs 20,000 crore for recapitalisation of PSBs. The government will introduce legislative amendments to privatise these banks in the current Budget session. Of the Rs 1.75 trillion divestment target set for the next fiscal, the government expects Rs 1 trillion to come from the divestment of its stake in PSBs and financial institutions.

“With the majority of asset quality stress recognised and many PSU Banks reasonably capitalised, it might be easier to attract investors. While these banks have lost share in lending, many of them have been able to grow retail deposits well, especially in the post-Covid era as they gained due to risk aversion”, analysts at Jefferies said.

The government & Reserve Bank of India (RBI) have shown flexibility in allowing a foreign bank to bail out an Indian bank and build wider branch presence in India. With Lakshmi Vilas Bank, DBS added over 500 branches to its India footprint versus just 35 earlier. It leap-frogged to being the largest foreign bank in India by branches. Interest from other foreign banks, private banks or even NBFCs that aspire to scale-up in India can't be ruled out, the foreign brokerage firm said in a report.

Meanwhile, State Bank of India (SBI) too hit a 52-week high of Rs 348, up 3.5 per cent on the NSE in intra-day trade today following its December quarter figures. The stock of the state-owned lender had hit a record high of Rs 374 on July 18, 2019. The bank today reported a 6.9 per cent year-on-year (YoY) drop in standalone net profit at Rs 5,196 crore for the quarter ended December 2020 (Q3FY21). The fall was largely driven by a marginal increase in provisions against bad loans. CLICK HERE FOR FULL REPORT