Nifty PSU Bank index gains 3% after falling 7% in past four trading days

Shares of public sector undertaking (PSU) banks were in focus with Nifty PSU Bank index gaining 3% on Friday after falling 7% in past four trading days on the National Stock Exchange (NSE).

State Bank of India (SBI), IDBI Bank, Punjab National Bank (PNB), Union Bank of India, Allahabad Bank, Oriental Bank of Commerce and Canara Bank were up in the range of 2% to 5% on the NSE at 02:43 pm.

The Nifty PSU Bank index, the largest gainer among sectoral indices, was up 3% as compared to 0.83% rise in the Nifty 50 index. In past four trading sessions, the PSU bank index slipped 7.5% against 0.75% decline in the benchmark index till Thursday.

According to Business Standard report, the government has asked the Reserve Bank of India (RBI) to consider diluting the Prompt Corrective Action (PCA) framework, to ensure that regulatory sanctions against public sector banks (PSBs) are lifted swiftly. CLICK HERE TO READ FULL REPORT.

SBI was trading higher by 3% at Rs 302 on the NSE. The stock of the country’s largest public sector lender had slipped 7% from Rs 317 to Rs 293 on Thursday after it reported the third consecutive quarterly loss. The bank posted a net loss of Rs 48.8 billion in June quarter (Q1FY19) led by higher provision from investment depreciation, higher wage opex and NPA provisions.

SBI’s management has guided at a strong recovery path led by the moderation in slippages (apart from NPA, entire balance stressed asset pegged at Rs 258 billion), strong growth in advances and fee income. Divestment of non-core assets and stake sale in subsidiaries is on the list.

“The stage is now set for an uptick in loan growth and lower stress accretion. Resolution in NCLT accounts (around Rs 630 billion exposure) can make our FY19-20E credit cost (average around 200bps) assumptions look conservative,” analysts at HDFC Securities said in results review with ‘buy’ rating on the stock and target price of Rs 340 per share.

Meanwhile, the WPI inflation (Wholesale Price Index) dipped to 5.09% in July, cooling off from 4-year highs in June. The consumer price index (CPI) inflation plunged to 4.17% in July as against 4.9% the previous month supported by the dip in food prices, data from the Central Statistics Office showed.

The sustained rise in core inflation seen till June was one of the main reasons why the Monetary Policy Committee (MPC) of the Reserve Bank of India had raised its policy, or repo rate twice since June.

“Despite declining, core inflation at 5.5% can continue to worry the MPC. Also, with improving domestic demand conditions, manufacturers will pass on higher input costs (from oil and commodity prices) to consumers, which can limit the downside to core inflation. We believe the MPC will be on hold unless pressures from higher-than-anticipated upside risks to inflation from crude oil, stronger demand conditions, and food prices materialize,” Dharmakirti Joshi, Chief Economist, CRISIL Research, on CPI data.

“The pressure on WPI could be from the elevated prices of the crude oil and the progression of the monsoon. However, the growth in inflation in the coming months is less likely to rise significantly given the favourable base effect. We expect the WPI inflation to moderate to below 5% in the coming months on account of a favourable base effect,” CARE Ratings said on WPI data.

BANK OF INDIA 92.85 88.85 4.50
CANARA BANK 276.85 267.60 3.46
ORIENTAL BANK 78.95 76.65 3.00
SYNDICATE BANK 38.85 37.80 2.78
BANK OF BARODA 146.60 142.70 2.73
UNION BANK (I) 86.50 84.40 2.49
ST BK OF INDIA 299.50 292.70 2.32
PUNJAB NATL.BANK 83.35 81.55 2.21
ANDHRA BANK 32.15 31.55 1.90
VIJAYA BANK 62.75 61.65 1.78
UCO BANK 19.35 19.05 1.57
DENA BANK 16.90 16.65 1.50
PUN. & SIND BANK 29.05 28.65 1.40
ALLAHABAD BANK 40.10 39.55 1.39
IDBI BANK 62.15 61.40 1.22

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