Stock prices of public sector banks fell up to 3% on Thursday, after the government announced that it would borrow an additional Rs 50,000 crore this fiscal through dated securities. “The evolving revenue-spending mix as well as the funding of the deficit has forced the government to turns to the market to raise extra cash to meet the funding shortfall,” Edelweiss said in a report. While the rupee closed at 64.08 to a dollar, up 0.12% from its previous close of 64.16, the bond yield rose sharply to 7.396% from its Wednesday’s close of 7.219%, showed Bloomberg data. On Thursday’s trade all the public sector bank stocks ended the session on a lower note, except IDBI Bank. However, IDBI Bank closed the session just 0.58 % higher at Rs 60.4 on NSE. The Nifty PSU Bank index was down 1.94%, closing at 3,694.45 points while Nifty Private Bank index closed just 0.08% higher at 14,098.3 points.
In the Nifty PSU Bank index, Syndicate Bank was the biggest loser, its stock closed the session 2.55% lower at Rs 78.45. Andhra Bank, Canara Bank, Punjab National Bank, Allahabad Bank, State Bank of India, Bank of Baroda, Oriental Bank of Commerce, Union Bank of India and Bank of India were among the other losers. “Just about three months ago, the government issued its borrowing plan for 2HFY18 in which it stuck to its budgeted borrowing schedule. But, since then, clearly, lower revenue mop-up and frontloading of the expenditure has perhaps compelled the govt. to borrow more,” the Edelweiss report said. Though other analysts argued that PSBs are one of the most attractive stocks for investment in 2018, the borrowing shock seems to have caused an impulse reaction in the market. A brokerage firm’s CEO said resolution of NCLT cases and recapitalisation should boost the sector, as banking stocks are currently trading at attractive valuations.