PSU banks rebound from Tuesday's fall, Bank of Baroda hits 52-week high

Oriental Bank, Canara Bank, Union Bank, IOB, BOB, BOI, Allahabad Bank and Syndicate Bank are up 4-7% on the NSE.

Shares of public sector undertakings (PSU) have rallied by up to 7% erasing most of their yesterday’s losses on the National Stock Exchange (NSE).

Oriental Bank of Commerce, Canara Bank, Union Bank of India, Indian Overseas Bank, Bank of Baroda, Allahabad Bank, Bank of India and Syndicate Bank are trading higher in the range of 4-7%, while Andhra Bank, Punjab National Bank, State Bank of India and IDBI Bank are up 1-3% on the NSE.

At 1500 hours, the NSE PSU banking share index CNX PSU Bank, the largest gainer among sectoral indices, is up 3.2% at 2,803 compared to 0.4% rise in benchmark CNX Nifty and 0.93% rise in Bank Nifty.

In past one month CNX PSU Bank index has rallied 29% as against 7.5% rise in benchmark index.

Analysts attribute the rally to improving macroeconomic situation — cooling off of inflation and narrowing of the current account deficit. The move by Reserve Bank of India (RBI) to delay implementation of the Basel III capital adequacy norms has given a further boost to these stocks, they said.

Banks, in general, do well when short-term rates come off and/or the currency appreciates, says analyst at JP Morgan.

The sustainability of the rally in Indian banks, especially PSUs, is likely to be determined by the currency and short term rates. Indian short-term yields have significantly softened over the last around 1 month, accompanied by currency strength, said analyst in a recent report.

Bank of Baroda is trading 5% higher at Rs 775, also its 52-week high on the NSE.  Among the other individual stocks, Oriental Bank of Commerce has surged 7% to Rs 235, followed by Union Bank of India and Canara Bank are up 6% each at Rs 144 and Rs 278 respectively.