 "Sensex, Nifty, stock brokers")
PSU Bank stocks: Shares of public sector banks (PSBs) were trading higher by up to 10 per cent on the BSE on Monday, extending their previous week's gain on the back of the Reserve Bank of India's (RBI's) approval to transfer Rs 2.1 trillion as surplus to the central government for financial year 2023-24 (FY2024).
Indian Overseas Bank (IOB), Uco Bank, and Punjab and Sind Bank rallied between 5 per cent and 10 per cent on the National Stock Exchange (NSE) in Monday's intraday trade. Central Bank of India, Bank of Maharashtra, Punjab National Bank, Union Bank of India, and Indian Bank, on the other hand, were up in the range of 2 per cent to 4 per cent.
At 02:10 pm, Nifty PSU Bank index, the top gainer among sectoral indices, was up 1.6 per cent, as compared to 0.5 per cent rise in Nifty 50. Other financial indices like the Nifty Bank, Nifty Financial Services, and Nifty Private Bank index were up 1.3 per cent each.
In the past three days, the Nifty PSU Bank index has outperformed the market by gaining 3.4 per cent as against 2.3 per cent rise in the Nifty 50. Further, in the past 10 trading days, the PSU index has appreciated by 7.1 per cent as compared to 4.6 per cent gain in the benchmark index. The Nifty PSU Bank index had hit a record high of 7,685.95 on April 30, 2024.
The surplus transfer of Rs 2.1 trillion is higher than that of FY2025BE of around Rs 80,000 crore and market expectations of around Rs 1.0-1.2 trillion. The additional amount of around Rs 1.3 trillion over FY2025BE is around 0.4 per cent of GDP. However, there could be a shortfall in divestment and telecom receipts that could partly offset gains from the surplus transfer. However, fiscal consolidation to the 4.5 per cent GFD/GDP target by FY2026 is now easier for the government, analysts at Kotak Securities said.
The brokerage firm expects the comfortable fiscal position and surplus cash balances to provide room for further buybacks, thereby reducing the net G-sec supply, and further improving demand-supply dynamics.
“We expect liquidity conditions to improve from 2QFY25, led by (1) revival in government spending, (2) seasonal payback in currency in circulation and (3) likely RBI intervention to manage FPI debt flows,” Kotak Securities said.
“We expect liquidity conditions to improve from 2QFY25, led by (1) revival in government spending, (2) seasonal payback in currency in circulation and (3) likely RBI intervention to manage FPI debt flows,” Kotak Securities said.
Although domestic factors are very conducive for a rally in bonds, we remain watchful for the possibility of sterilisation of the forex intervention and upside to global yields, amid further delays in the US Fed rate cycle, the brokerage firm said.
More From This Section
"Meanwhile, higher-than-budgeted inflow could aid either fiscal consolidation or enhance capital expenditure. While clarity on government's stance is awaited until revised budget, any decline in G-sec yield amid anticipation of fiscal prudence is seen to benefit treasury income of banks, especially PSU banks," ICICI Securities had said in a note.
Among individual stocks, IOB surged 10 per cent to Rs 74 in intraday trade on huge volumes. The average trading volume on the counter jumped nearly 10-fold with as many as 95.12 million shares changing hands on the NSE and BSE.
Uco Bank jumped 8 per cent to Rs 61.40 on the back of over two-fold rise in average trading volume. A combined 55.37 million shares have changed hands on the NSE and BSE so far.
"With declining inflation and softening of global commodity prices, import cost will reduce substantially. With exports turning positive, coupled with import-substitution measures and higher capital inflows, managing the current account deficit may be less problematic in the current year. Trends in industrial growth are also encouraging. Against this backdrop of a challenging macro-economic environment, the domestic banking system continued to enjoy the confidence of the banking public," Uco Bank said in its fiscal 2023-2024 (FY24) annual report.
The Indian banking industry has been on an upward trajectory aided by strong economic growth, rising disposable incomes, increasing consumerism and easier access to credit. Digital modes of payments have grown by leaps and bounds over the last few years and technological innovations have led to marked improvements in efficiency, productivity, quality, inclusion and competitiveness in the extension of financial services, especially in the area of digital lending, the bank said.
Moving ahead, it is expected that the credit growth rate may moderate in FY25. Deposit growth is likely to improve in FY25 as banks have been strongly emphasizing the growth of their liability franchise. Compression of interest spreads, may exert pressure on the profitability, though the same is expected to remain healthy. On the asset quality front, it is expected that the same will continue improving. The capital position of banking sector is expected to remain comfortable in the near term, Indian Bank said in its FY24 annual report.
