PSU Banks Extends Gain, Bank Nifty Rallies As Well

Banking shares extended gains for the second straight day on the bourses after the Government of India announced on Tuesday that the five hundred and one thousand rupee notes will no longer be legal tender from 8th November 2016 midnight.

The public sector undertaking banks, i.e. PSU banks, the largest gainer with the Nifty PSU Bank Indexwas up 8.29%, as compared to 3.65% rise in the Nifty Bank and 1.89% gain in the Nifty Index at 12:47 PM.

State Bank of India (SBI), Indian Overseas Bank (IOB), Vijaya Bank, Uco Bank, United Bank of India, Syndicate Bank, Punjab & Sindh Bank, Union Bank of India and Allahabad Bank from the PSU banks were up between 5%-18%.

SBI share price up 9% at Rs 284.20 its new 52-week highs on the NSE in intra-day trade.

Apart from United bank of India and Punjab and Sind Bank, all the others are top 500 recommendations for the quarter by Dynamic Levels.

Stock Name	% Rise
SBI	10.00%
IOB	10%
Vijaya Bank	18.00%
UCO Bank	12.00%
Union Bank Of India	11%
Allahabad Bank	9%
Syndicate Bank	11%
Punjab & Sind	9%

According to analysts, as directed by the Government, the 500 and 1000 Rupee notes which now cease to be legal tender and are to be deposited or exchanged in banks. The deposits and exchanges are subjected to certain limits. This will involuntarily lead to more amounts being deposited in Savings and Current Account of commercial banks. This, in turn, will improve the liquidity position of the banks, which can be utilized further for lending purposes. However, to the degree that households have held on to these funds for emergency purposes, there would be extractions at the second stage, they added.

The Analysts also said that the government’s move to phase out high denomination currency notes signals well for long-term prospects for the banking, financial services and insurance (BFSI) industry.

The banks should gain from higher deposits (savings) and transaction volumes and investment units such as insurance, mutual fund and wealth management companies should profit from higher share of financial savings.

Also, Nifty Bank hit 20000 for the first time since September 23, on value buying. The Bank Nifty Index rose as much as 3.9 per cent, the biggest intraday percentage gain since March 2.

India’s move to eliminate larger banknotes from circulation is seen as a positive for banking stocks as reserves are expected to swell when people start tendering their cash, improving their near-term liquidity.

Among the private players, ICICI Bank share price rose 5.7 per cent and Yes Bank share price went up 6.9 per cent. ICICI hit its highest in over 14 months and Kotak Bank share price up 1.3% at Rs 833.45 traded at its new 52 weeks high.

The Nifty Bank Index had gone up 15.3 per cent this year through Wednesday’s close versus a 6.1 per cent rise in the broader NSE Index.