PSU banks in focus on Goldman Sachs upgrade

SBI, Oriental Bank, Indian Overseas Bank, BOB and Punjab National Bank are up 1.5% to 4% on the NSE.

Banking shares mainly public sector undertakings (PSUs) are in focus after Goldman Sachs upgraded ratings of state-owned banks.

State Bank of India (SBI), Oriental Bank of Commerce, Indian Overseas Bank, Bank of Baroda and Punjab National Bank are up 1.5% to 4% on the National Stock Exchange (NSE).

Syndicate Bank, Canara Bank, Bank of India, Union Bank of India, IDBI Bank, Allahabad Bank and Andhra Bank are up 1% each.

The NSE PSU bank index CNX PSU Bank index, the largest gainer among sectoral indices, up 1.8% compared to 0.5% rise each in benchmark CNX Nifty and Bank Nifty at 1035 hours.

A global investment bank expects that the stress asset quality should reduce for public sector banks including SBI, Bank of Baroda and Punjab National Bank. Hence they should see a gradual reduction in stress loans on lower slippages as well as higher recoveries.

Goldman Sachs says state-owned banks may see bad loans fall by 3ppt in fiscal yr 2016 after increasing to 17.5% of total in fiscal year 2015, the Bloomberg report suggests.

Goldman Sachs raised its rating on SBI and Bank of Baroda to buy from neutral, while Punjab National Bank raised to neutral from sell, added report.