PSU banks in demand; CNX PSU index up over 2%

Allahabad Bank, Oriental Bank, Canara Bank, IOB and Andhra Bank are up more than 3% each on NSE.

Shares of public sector undertaking (PSU) banks are in demand and trading higher by up to 4% on the National Stock Exchange (NSE), outperforming the benchmark indices that have gained less than 1%.

Among individual stocks, Allahabad Bank, Oriental Bank of Commerce, Canara Bank, Indian Overseas Bank and Andhra Bank are up more than 3% each. State Bank of India (SBI), Union Bank of India, Bank of India, Syndicate Bank, Punjab National Bank and Bank of Baroda, on the other hand, are up 2-3% on NSE.

At 1407 hours, CNX PSU Bank index was up 2.52% at 4,240 as compared to 0.27% rise in the benchmark CNX Nifty.  The banking index hit a high of 4,250 during intra-day trade so far.

The market experts believe the softening in bond yields may lead to treasury gains on bond portfolios. On Tuesday, the benchmark 10-year bond yield ended down 2 basis points at 7.90%, after touching 7.89% in intra-day trade, its lowest level since 15 July 2013, a Reuters report suggests.

Meanwhile, rating agency CRISIL in report dated December 2, 2014 said that net interest margin of banks are expected to improve slightly in 2014-15 due to gradual recovery in the economy, control over cost of funds and better asset mix leading to higher yield on advances.