PSBs jump on privatisation buzz; Bank of Maharashtra, IOB hit upper circuit

Shares of public sector banks (PSBs) were in focus at the bourses on Tuesday amid report that the government has shortlisted four mid-sized state-run banks for privatisation. The four banks on the shortlist are Bank of Maharashtra , Bank of India, Indian Overseas Bank and the Central Bank of India, Reuters quoted two officials in a report.

At 09:40 AM, the Nifty PSU Bank index was up 3.34 per cent as compared to 0.6 per cent gain in the Nifty50 index. In February so far (till Monday), the Nifty PSU Bank index has rallied 16.4 per cent as compared to a 7.2 per cent gain in the benchmark Nifty50.

Among individual stocks, Bank of Maharashtra and Indian Overseas Bank hit 20 per cent upper circuit at Rs 19.05 and Rs 13.10, respectively. Besides, Central Bank of India surged 16.8 per cent intra-day at Rs 16.30 while Bank of India rose 14.95 per cent at Rs 67.65. Among other stocks, Indian Bank, Union Bank, UCO Bank, J&K Bank, Punjab National Bank, Bank of Baroda, and state Bank of India gained in the range of 2 per cent-17 per cent.

Bank of Mahrashtra, Bank of India, Indian Bank, and State Bank of India also scaled their respective fresh 52-week high level, as well. 

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.