Lack of fresh stimulus dragged PSU banks' stocks on Thursday: Analysts

Lack of any fresh stimulus in the government's recaptilisation announcement led to poor performance of the public sector banks (PSB) on the domestic bourses on Thursday. Analysts, however, maintained that it is just a "knee-jerk reaction".

Stocks of state-run banks like the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) plunged almost over 5 per cent during the day's trade -- a day after the government charted out plans to infuse capital in PSBs.

Around 2.35 p.m., PNB traded lower by 5.71 per cent, followed by BoB (down 5.31 per cent) and SBI (down 4.02 per cent).

"The recapitalisation announcement had happened sometime in October, 2017. Post that, yesterday's (Thursday) announcement was just about allocation. There was no fresh stimulus or input from the government's side. So, probably on the same news, we cannot expect the same kind of reaction every time," Sacchitanand Uttekar, Assistant Vice-President, Research for Tradebulls, told IANS.

Uttekar said in October 2017, when the government had announced recapitalisation of state-run banks to the tune of Rs 2.11 lakh crore over two years to keep them in good health, most of the PSBs moved almost 20-22 per cent higher.

"When the announcement was done in October, the Bank Nifty's jump was of almost 1,000 points or more than that," said Uttekar.

Deepak Jasani, Head - Retail Research, HDFC Securities, said: "The expectation was that the healthy banks will also get an infusion in the first round, which has not happened. In the first round, only the 'shaky ones' have got the majority of the infusion. That is one reason for the disappointment, especially from the frontline banks."

The government on Wednesday announced plans to infuse over Rs 1 lakh crore, including Rs 80,000 crore through recap bonds and Rs 8,139 crore as budgetary support, during the current fiscal seeking to perk up public sector banks that have been hit by huge non-performing assets (NPAs).

Of the recap amount, among others the government announced that it will give Rs 10,610 crore to IDBI, Rs 8,800 crore to the SBI, Rs 5,375 crore to BoB, Rs 4,865 crore to Canara Bank and Rs 4,524 crore to Union Bank.

It was also announced that the recap plan would be cash neutral and the bonds thus issued would be non-SLR (Statutory Liquidity Ratio) and non-tradable.

"The second issue is that there is no clarity whether the bonds will get SLR status or not," Jasani told IANS.

"The third thing is that the governement's ownership in a lot of banks will go up because of this infusion. Banks will have a negative dilution impact as the book value will suffer because of the huge gap between the current book value and current prices," said Jasani.

Jasani added that the reaction, however, was temporary -- "a knee jerk reaction" -- and will fade away in some time.

Utteker expected rangebound trade in the PSBs in the upcoming trade sessions.

"Most of the PSBs will go through consolidation. On the contrary, most of the private banks will continue on the positive side," he added.

--IANS

ppg/ag/vm