Privatisation hope lifts Nifty PSB index 5%; BoI, IOB gain 40% in 2 days

Two of the four short-listed banks will be selected for sale in the FY22 which begins in April
Public sector banks were ruling higher for the second day in a row as investor sentiment remained buoyant amid privatisation buzz. The Nifty PSU Bank index defied market gravity and surged 5.6 per cent to hit an intra-day high of 2,446 on the National Stock Exchange (NSE) as against a 0.6 per cent drop in the Nifty50 index. 

On Tuesday, a Reuters report suggested that the government has shortlisted four mid-sized state-run banks -- Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India -- for privatisation. 

"Two of those banks will be selected for sale in the FY22 which begins in April. The government, however, will continue to hold a majority stake in India's largest lender State Bank of India, which is seen as a 'strategic bank' for implementing initiatives such as expanding rural credit," the report said.

Effectively, shares of Bank of Maharashtra soared 21 per cent, Bank of India (20 per cent), Indian Overseas Bank (23 per cent), and the Central Bank of India (20 per cent). In the past two days, shares of these banks have jumped over 40 per cent each.

That apart, other PSU banks' stocks advanced too with UCO Bank, J&K Bank, Punjab National Bank (PNB), Indian Bank, Bank of Baroda, SBI, and Canara Bank up between 1.5 per cent and 7 per cent. 

Finance Minister Nirmala Sitharaman proposed to divest stake in two PSBs while unveiling Budget 2021 proposals. That apart, the FM alo set aside Rs 20,000 crore for recapitalisation of PSBs. "The government will introduce legislative amendments to privatise these banks in the current Budget session. Of the Rs 1.75 trillion divestment target set for the next fiscal, the government expects Rs 1 trillion to come from the divestment of its stake in PSBs and financial institutions," she had said.

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