At 02:35 PM; Nifty PSU Bank index was up 2.5% at 2,876, recovering 5% from its intra-day low of 2,747 on the National Stock Exchange (NSE). In comparison, the Nifty 50 index was up 0.58% at 10,550, bouncing back 2% from its early morning low of 10,334.
The RBI governor, Dr. Urjit Patel, resigned from his position, effective 10th December 2018, citing personal reasons. The government has been seeking the relaxation of Prompt Corrective Action (PCA) norms for PSU banks, which if relaxed, would be positive for those banks, according to a brokerage firm.
“There are four major areas where the government and the RBI need to find a common ground the proposal to use the RBI’s balance sheet to recapitalize public sector banks, easing norms for banks under the (PCA) mechanism, additional liquidity window for NBFCs and setting up of an independent regulator for payment systems outside the RBI,” Motilal Oswal Securities said in a client note.
Meanwhile, shares of non-banking financial companies (NBFCs), housing finance company (HFCs) and microfinance institutions (MFIs) were too trading higher by up to 6% on the BSE on hopes of improving liquidity situation.
Shriram Transport Finance, Dewan Housing Finance Corporation (DHFL), Mahindra & Mahindra Financial Services, Equitas Holdings and LIC Housing Finance were up in the range of 3% to 6% on the BSE.
As regards to NBFCs, the brokerage firm believes while the liquidity situation has been improving over the past two months, higher cost of funds and slowdown in growth will impact the sector as a whole.
“We believe the impact will be particularly pronounced for wholesale financiers. HFCs with better parentage and higher share of pure retail home loans would have easier access to debt capital, in our view. Also, vehicle financiers have better pricing power, and thus, should be able to largely manage spreads in this environment. The RBI and government have been taking steps to improve the situation, which should address investor concerns,” it added.