PSU Banks Gain The Most Since The Recap Plan Announced Last Year

Shares of public sector banks gained the most since the government announced the Rs 2.11-lakh-crore recapitalisation plan last year.

The PSU Bank Index rose as much as 8 percent intra-day, the most since Oct. 25, 2017, according to Bloomberg data. That’s driven by a nearly 10 percent gain in index heavyweights like State Bank of India, Punjab National Bank and Bank of Baroda during the period.

Analysts said the recovery of cases referred to the National Company Law Tribunal will aid PSU banks’ balance sheets. The banking sector, they said, is likely to benefit from the resolution being worked out for Essar Steel. Over 90 percent of votes cast by Essar Steel’s committee of creditors were in favour of ArcelorMittal’s Rs 50,000-crore resolution plan. In the recent past, banks have been able to recover dues from insolvent steel assets with minimum haircuts.

Also, the Supreme Court allowed the Central Electricity Regulatory Commission to amend power purchase agreements of three coal-fired plants in Gujarat. A potential tariff hike by the power regulator can benefit the state-run lenders which have an exposure to these stressed lenders.

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