Sensex crosses 33,100 for first time: Modi government’s Rs 2.11 lakh crore PSU bank recap steers market to record highs

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Updated: Oct 25, 2017 9:59 AM

Sensex and Nifty opened at lifetime highs on Wednesday cheering Modi government's Rs 2.11 lakh crore plan to recapitalise PSU banks.

Bombay Stock Exchange. (Image: Wikimedia Commons)

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. The heavyweight banking stocks such as Punjab National Bank, State Bank of India, Bank of Baroda, ICICI Bank all advanced heavily in the opening trade. The benchmark Sensex rose 387.94 points to open at 32,995.28 points and NSE Nifty jumped 113.45 points to start at 10,321.15 points.

Shares of all the major listed PSU banks surged massively in the wee hours of trading. 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 29%, Union Bank – up 20%, Canara Bank – up 20%, Bank of India – up 20%, State Bank of India – up 20%, Oriental Bank of Commerce – up 17%. The heavyweight stocks of SBI and ICICI Bank contributed the most to the Sensex rally, these two stocks alone added about 254 points to the index while HDFC Bank, HDFC and Kotak Mahindra Bank shaved off about 256 points out of the index.

Other major gainers include Axis Bank – up 3.14%, L&T – up 3%, ITC – 1.4% and Power Grid – 1.44%. The Nifty Bank index suffered the contrary trade between heavyweights SBI, PNB, ICICI and HDFC Bank, Kotak Mahindra Bank, Yes Bank, 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.

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,” he 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 non-performing assets (NPA) by the RBI.

Shares of Hindustan Unilever, Kotak Mahindra Bank, HCL Technologies will be in watch following their Q2 results. Other major companies which are scheduled with second-quarter earnings are Emami, Engineers India, Exide Industries, GlaxoSmithKline Pharmaceuticals, IDFC Bank, Mahindra & Mahindra Financial Services, MindTree, MphasiS, NIIT, PI Industries, PNB Housing Finance, Quess Corp, RBL Bank, Tata Elxsi, V-Guard Industries, Tata Communications.

The Dow rallied on Tuesday, registering its biggest daily percentage gain in more than a month, as stronger-than-expected results and forecasts from companies including 3M and Caterpillar fueled optimism about economic strength, Reuters reported. The S&P 500 and Nasdaq ended up slightly. 3M advanced 5.9 percent and Caterpillar rose 5 percent, giving the Dow its biggest boost after the companies reported quarterly results and gave upbeat outlooks. The S&P industrial sector, up 0.5 percent, also hit a record intraday high. The Dow Jones Industrial Average rose 167.8 points, or 0.72 percent, to end at 23,441.76, a record-high close. The S&P 500 gained 4.15 points, or 0.16 percent, to 2,569.13 and the Nasdaq Composite added 11.60 points, or 0.18 percent, to 6,598.43. Upbeat results also came from General Motors, which rose 3 percent.

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