Last updated: Sep 18, 2023 3:21 PM IST
Nifty PSU Bank was the best performing index with nearly 4% gain on NSE in an otherwise uneventful session on Monday with 11 of the index constituents at fresh 52-week highs.
Shares of public sector banks (PSU) performed well with Indian Overseas Bank (IOB), Central Bank of India, Punjab & Sind Bank (PSB) and Uco Bank rising up to 19 per cent on high volumes. an otherwise subdued market. Over the past four trading days, the share prices of these banks have risen between 30 and 45 percent.
Besides these four banks, Bank of India, Bank of Maharashtra, Union Bank of India, Indian Bank and Punjab National Bank (PNB) rose by 5 to 8 percent. Barring State Bank of India (SBI) and Indian Bank, all other PSU banks were trading at their respective multi-year highs.
Strong credit growth, relatively lower valuations and commendable work on asset quality contributed to the rise in the banking index.
Axis Securities in a recent note highlighted that credit growth of scheduled commercial banks (SCBs) rose 15 percent from March 2023, compared to 8.6 percent a year ago. The faster pace of credit offtake is attributed to the pent-up demand factor as the normalization of economic activity accelerated.
“The RBI’s December 2022 Financial Stability Report highlighted that Indian banks are well capitalized and well-equipped to absorb any macroeconomic shocks. Under the base case, the GNPA ratio of SCBs is likely to improve from 5 percent in September 2022 to 4.9 percent in September 2023. Even the slippage ratio, which has been on an upward trend since December 2021, has cooled in the second quarter of 2023 . PSBs have registered the most improvement during this period,” the broker said.
In the past five days, the PSU Bank index has risen 8 percent on expectations of improved earnings and asset quality of state-owned banks.
