Mumbai: The markets surged to a new high on Wednesday amidst a rally in the shares of public sector banks (PSBs) after the government cleared the Rs 2.11 lakh crore bank recapitalisation plan. While the Nifty Bank index soared 3.36 per cent, the Nifty PSU Bank Index vaulted 29.63 per cent as most of the state owned banks posted strong double digit gains in the range of 15 to 50 per cent.
“Given the sheer magnitude of this recap package and the significant implied easing in credit conditions, as credit and investment growth rebound, we would expect a re-rating of growth expectations in India in the coming quarters. This will likely be bullish for equities and the Indian rupee in the medium term,” said analysts at Goldman Sachs.
The Nifty hit a record high of 10,340.55 in the intra-day trade before ending the day a new closing high of 10,295.35. Meanwhile, the Sensex soared 435.16 points or 1.33 per cent to close the day at 33,042.50. SBI was the biggest gainer in the Sensex pack, up by a whopping 27.58 per cent while PNB was the biggest gainer among PSU Banks, up 48.88 per cent.
“We are positively surprised by the quantum of the recapitalisation and it matches our estimates of capital requirements for PSU banks for both NPA provisioning and some growth. This package should drive a re-rating in PSU banks,” said Nomura Financial Services. The state owned banks had an outstanding gross non-performing loans of Rs 7.3 lakh crore, restructured loans of Rs 1.6 lakh crore and net non-performing loans of Rs 4.2 lakh crore.
