PSU banks gain; Oriental Bank, Canara Bank up 5%

Nifty PSU Bank index was up 2.7% as compared to 0.18% gain in Nifty 50 and 0.60% rise Nifty Bank index at 03:14 pm.

Shares of public sector undertaking (PSU) banks were trading higher erasing part of their Monday’s losses after the retail inflation, as measured by the Consumer Price Index (CPI), touched a five-month low of 5% in August’16 from 6.1% in July’16.

The Wholesale Price Inflation (WPI) based inflation for August’16 rose further to 3.74% ( y-o-y) from 3.55% in the previous month.

CARE, the rating agency, expects WPI inflation to moderate in the coming months with kharif output coming into the markets.

“However, crop loss due to flood like situations in certain part the country could put upward pressure on the price of food products. We expect the WPI to average 3% this fiscal,” said CARE in a note.

Despite the sharp drop in CPI inflation in August, we don’t expect the Reserve Bank of India (RBI) to cut policy rates in the upcoming Monetary Policy Review on 4 Oct’16, said Religare Institutional Research.

Meanwhile, we expect the RBI to continue with its “easing by stealth” strategy via liquidity infusion into the system through OMO purchases, it added.

Among the individual stocks, Oriental Bank of Commerce (up 7% at Rs 130), Bank of India (5% at Rs 122), Canara Bank (5% at Rs 312), Bank of Baroda (4% at Rs 169), Punjab National Bank (3% at Rs 142) and Allahabad Bank (3% at Rs 83) were up between 3% and 7% on the National Stock Exchange (NSE).

At 03:14 pm, Nifty PSU Bank index, the largest gainer among sectoral indices, was up 2.7% as compared to 0.18% gain in the benchmark Nifty 50 and 0.60% rise Nifty Bank index.

On Monday, Nifty PSU Bank index was down 4.74% against 1.7% fall in the Nifty 50 index.