12 stocks of Nifty Bank surpass 50-share Nifty turnover after Rs 2.11 lakh crore recapitalisation plan

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Published: October 25, 2017 12:56:51 PM

All eyes turn to banking stocks after Modi government’s mega plan of Rs 2.11 lakh crore to recapitalise the NPA-laden state-run banks was announced. Nifty Bank index with 12 heavyweight banking stocks surpassed the turnover of the 50-share Nifty index.

About Rs 16,405 crore worth of shares exchanged hands on the Nifty Bank index while on Nifty 50 the turnover stood at Rs 16,137 crore. (Image: Wikimedia Commons)

All eyes turn to banking stocks after Modi government’s mega plan of Rs 2.11 lakh crore to recapitalise the NPA-laden state-run banks was announced. Since morning heavy volumes were observed in the shares of banking stocks mainly in PSU (public sector undertaking) banks. The trading volume was so huge in the banking stocks that Nifty Bank index with 12 heavyweight banking stocks surpassed the turnover of the 50-share Nifty index. Shares of PSU banks rallied massively on Wednesday following the recapitalisation announcement by Finance Minister Arun Jaitley on Tuesday.

The PSU banks are reeling under the pressure of stressed assets or non performing loans for years but the problem spiked in late 2015. This resulted in a continuous downsizing of profits and a quarter-on-quarter rise in NPAs (non-performing assets) which had a negative impact on the share prices of PSU banks. Modi government’s plan to recapitalise the lenders with a huge capital size of Rs 2.11 lakh crore steered investors to hop onto the stocks of PSU banks. The stocks of all the listed state-run banks on the PSU bank index of NSE traded in green today with SBI and PNB rising up to 40%.

About Rs 16,405 crore worth of shares exchanged hands on the Nifty Bank index while on Nifty 50 the turnover stood at Rs 16,137 crore. This implies that 12 stocks on Nifty Bank are heavily traded than 50 stocks of Nifty index. The turnover on Nifty PSU Bank index was at Rs 12,508 crore (approx) as at 12:30 pm. India’s largest bank by asset size and loan book — State Bank of India — jumped as much as 24.56% to hit the 52-week high of Rs 316.95 and the stock alone contributed Rs 5,700 crore to the trading turnover.

Punjab National Bank was the biggest gainers among the banking stocks, rose 40% to hit the 52-week high of Rs 193.45, followed by Bank of Baroda – up 28%, Union Bank of India – up 29%, Canara Bank – up 34%, Bank of India – up 30%, Oriental Bank of Commerce – up 25%, Andhra Bank – up 21%, Allahabad Bank up 21%, IDBI Bank, Indian Bank, and Syndicate Bank up 20% each.

The Nifty Bank index suffered the contrary trade between the gainers — SBI, PNB, ICICI Bank, Canara Bank, Bank of Baroda and losers — HDFC Bank, Kotak Mahindra Bank, Yes Bank, IndusInd Bank, The Federal Bank. The index advanced 935.65 points to hit the day’s high of 25,157.8 points but failed to breach the record high of 25,198.8 points. The Nifty PSU Bank index soared the most since the time it was constituted. The index gained 743.05 points or 24% to hit the all-time high of 3,835.9 points.

Sensex and Nifty opened at lifetime highs on Wednesday cheering Modi government’s Rs 2.11 lakh crore plan to recapitalise PSU banks. BSE Sensex gained as much as 509.99 points to hit the all-time high of 33,117.33 points while NSE Nifty added 132.85 points to mark the record high of 10,340.55 points.

In a major announcement, Finance Minister Arun Jaitley on Tuesday said that the cabinet has approved Rs 1.35 lakh crore for India’s ailing public banking system from recapitalisation bonds, of the total approved 2.11 lakh crore. Recap Bonds are used as payment for the shares bought by the government to ailing banks in a bid to raise their capitals. Earlier in the 90s, the then government had issued recap bonds to borrow from the banks without allowing fiscal deficit to expand. “It was decided that a bold step needs to be taken by the government to recapitalise banks,” Arun Jaitley added. The banking sector fears accretion of more than Rs 40,000 crore of bad loans to its books following recent classification of eight consortium accounts of Axis Bank as NPA by the RBI.

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