PSU Banks gain; Nifty PSU Bank index up nearly 2%

SBI, Oriental Bank, Allahabad Bank, Union Bank, PNB, BOI, Vijaya Bank and BOB were up 1% to 4% on the NSE.

Shares of public sector undertaking (PSU) banks were trading higher by up to 4% on the National Stock Exchange (NSE) in otherwise range-bound market.

State Bank of India (SBI), Oriental Bank of Commerce, Allahabad Bank, Union Bank of India, Punjab National Bank, Vijaya Bank, Bank of India, Bank of Baroda, Syndicate Bank and IDBI Bank were up between 1% and 4% on the NSE.

At 10:55 am; the Nifty PSU Bank index, the largest gainer among sectoral indices, was up nearly 2% or 1.7% as compared to 0.14% rise in the benchmark Nifty50 index. Nifty Bank index marginally up by 0.15%, while Nifty Private Bank index down 0.01% on the NSE.

The Reserve Bank of India (RBI) on Wednesday, in the Monetary Policy Committee (MPC) meeting provided some relief to banks by withdrawing the incremental cash reserve ratio (CRR) from the fortnight beginning December 10. CRR is the portion of deposits which banks must maintain with the RBI.

On November 26, the central bank had announced an incremental CRR of 100% on the increased deposits between September 16, 2016 and November 11. The move was aimed at absorbing the increase in liquidity in the banking system following the government's decision to scrap Rs 500 and Rs 1,000 notes.

Reacting on the move, since then most of the PSU banks had underperformed the market by falling 1.7% against 1.6% rise in the Nifty50 index and unchanged in Nifty Bank index till yesterday.

“Despite the humongous flow of deposits to banks because of demonetisation, we don?t see any significant impact on bank profitability as incremental deposits are expected to flow into securities issued under the Market Stabilisation Scheme (MSS),” CRISIL Research said in monetary policy review.

“Overall, net interest margins (NIMs) are expected to decline by 10-20 bps in fiscal 2017 given the downward pressure on lending rates and the impact of the UDAY (financial package for power distribution companies) scheme. Banks will, however, book higher treasury gains given the sharp decline in gilt yields. Ceteris paribus, treasury gains are expected to boost the return on assets of banks by 0.20-0.25%” added report.

COMPANY	LATEST	PREV CLOSE	GAIN(%)
VIJAYA BANK	46.85	45.10	3.88
ORIENTAL BANK	121.90	118.35	3.00
ALLAHABAD BANK	69.35	67.75	2.36
J & K BANK	62.10	60.90	1.97
CORPORATION BANK	45.65	44.80	1.90
DENA BANK	34.55	33.95	1.77
UNION BANK (I)	144.10	141.70	1.69
DHANLAXMI BANK	24.45	24.05	1.66
I O B	24.70	24.30	1.65
KARNATAKA BANK	106.20	104.50	1.63
SYNDICATE BANK	67.50	66.50	1.50
PUNJAB NATL.BANK	135.10	133.10	1.50
BANK OF BARODA	160.85	158.50	1.48
INDIAN BANK	247.90	244.30	1.47
IDBI BANK	69.65	68.65	1.46
ST BK OF BIKANER	719.00	709.20	1.38
ST BK OF MYSORE	566.00	558.65	1.32
CANARA BANK	315.25	311.25	1.29
BANK OF INDIA	116.15	114.70	1.26
ST BK OF INDIA	263.10	259.90	1.23