PSU Bank extends gain post RBI policy; CNX PSU index surges nearly 15% in four days

At 11:33 AM, CNX PSU Bank index was up 2% at 3,617 compared to a marginal 0.01% rise in the CNX Nifty.

Shares of public sector undertakings (PSUs) banks continued trading higher fourth straight day after the Reserve Bank of India (RBI) left its key interest rate unchanged at 7.25%, raising the possibility of a rate cut later in the year.

Canara Bank and Union Bank of India were up 5% each, while Oriental Bank of Commerce, Bank of India, Punjab National Bank and Bank of Baroda were up 2%-3% on the National Stock Exchange (NSE).

State Bank of India, Andhra Bank, Syndicate Bank, Indian Overseas Bank and Allahabad Bank were up 1% each.

At 11:33 AM, CNX PSU Bank index, the largest gainer among sectoral indices was up 2% at 3,617 compared to a marginal 0.01% rise in the CNX Nifty. The PSU bank index gained 3.2% from its intra-day low of 3,505.

In its policy review on August 4, RBI said, the outlook for growth is improving gradually. Favourable real income effects could accrue from weaker commodity prices, in particular crude oil, and a possible step-up in agricultural activity if monsoon conditions continue to improve.

However, there are signs that consumption demand, especially in urban areas, is picking up. Car sales for July were strong. Nominal bank credit growth is lower than previous years, but adjusted for lower inflation as well as for lower borrowing by oil marketing companies and increased borrowing from commercial paper markets, credit availability seems to be adequate for most sectors, the central bank said.

Meanwhile, in past four trading sessions, CNX PSU Bank index has rallied nearly 15% from 3,150 on July 29, as the government proposed to infuse Rs 70,000 crore in PSU banks over four years to shore up their capital base. Bank Nifty gained 3.7%, while CNX Nifty up 2% during the same period.