New measures positive for PSU bank stocks

Incremental newsflow around NPA resolution will drive performance of PSU banks

On a day when the government announced the long-awaited measures to resolve the huge bad loans menace of Indian banking sector, stocks of most public sector banks declined between 1 to 5 per cent; stocks of a few corporate facing private banks also fell.

Part of this weakness can be attributed to the strong surge witnessed by these stocks in recent times in anticipation of concrete measures to solve the bad loans issue. Lack of clarity around further action by the Reserve Bank of India (RBI) as well as quantum of hair cuts required to be taken by the banks while