PSU Banks rise sharply up to 10 per cent; Canara Bank, BOB, India Bank lead gains

Nifty PSU Bank index has been strenghtening for two straight sessions and in two sessions has gained over 5 per cent. The gains have been led by counters namely Canara Bank, Bank of Baroda, SBI, Indian Bank and PNB among others.

All the 12 constituents traded in the green, with maximum gains of over 10 per cent logged by UCO Bank.

Meanwhile, other low float PSBs also rose with gains of over 7 per cent each in the case of Punjab and Sind Bank, IOB and Central Bank of India.

Other PSBs gaining today include Bank of India, Canara Bank, Indian Bank and Maharashtra Bank-all trading with gains of over 3 per cent each.

The gains come in anticipation that the RBI citing low growth which fell to a seven-quarter low in the September quarter and continuing higher inflation will not be resorting to a rate hike in the forthcoming monetary policy due on Friday (December 6).

The bi-monthly MPC committe has already started their 3-day meet today (Wednesday) and the recent macros point that the MPC is required to carefully evaluate policy measures to address inflationary pressures and revive economic growth in the coming months.

Also, the gains are spurred in the pack as the market is discounting for something positive as this shall indeed be RBI Governor's Shaktikanta Das last term.

Reasons for uptrend in PSB stocks

 Atul Parakh, CEO of Bigul believes today's rally in PSU bank stocks is primarily driven by the anticipation of a potential cut in the Cash Reserve Ratio (CRR) during the ongoing RBI meeting, with market analysts highlighting significant net interest income (NII) benefits for PSU banks such as PNB, SBI, and Bank of Baroda.

Market experts expect a potential 50 basis points CRR reduction to address the current liquidity deficit, which could inject around ₹1.2 trillion into the banking system. While a direct rate cut is unlikely, the central bank is focusing on stimulating economic growth by potentially easing regulatory norms and ensuring robust credit flow to key sectors, making PSU banks an attractive investment proposition in the current market scenario.