Indian Bank, Punjab National Bank and Canara Bank were among the state-owned banks that saw some relief in Tuesday’s trading session, December 9, after witnessing one of the worst sell-offs in recent times on Monday, which dragged the Nifty PSU Bank index lower by 3.40%, its second-biggest single-day crash in December, and led it to lose 8% in just nine sessions.
As of 11:30 a.m., Bank of India, Canara Bank, Punjab National Bank and Indian Bank were trading with gains of up to 1%, despite the pain in the broader market extending into a second day. However, the recent sell-off has caused most of the index constituents to correct sharply from their recent highs.
For instance, Indian Bank was down 13% from its one-year high of ₹894.85 per share, touched on November 18, while Punjab National Bank shares had also declined sharply by 8.65% from their recent high of ₹127.80 per share, recorded last week.
Bank of Maharashtra, Bank of India, Bank of Baroda, Canara Bank and Union Bank of India were also down between 5% and 8% from their recent peaks. Meanwhile, State Bank of India shares were down 4% from their recent peak of ₹999 per share.
After witnessing an uninterrupted rally over the last three months, PSU bank stocks came under intense selling pressure earlier this month after the government clarified that it is not considering a proposal to raise the foreign direct investment (FDI) limit in public sector banks.
Earlier in October, reports had emerged suggesting that the government might consider increasing the FDI limit in public sector banks to 49% from the current 20%. The speculation triggered a strong rally in PSU bank stocks, pushing the Nifty PSU Bank index to fresh record highs.
However, the government has now clarified that no such proposal is under consideration.
Minister of State for Finance Pankaj Chaudhary stated on Tuesday that the government is not evaluating any plan to raise the FDI limit. Responding to a written question in the Rajya Sabha on whether the government had proposed increasing the FDI cap in PSBs to 49%, Chaudhary replied in the negative.
The FDI limit in PSBs and private-sector banks stands at 20% and 74%, respectively. In private-sector banks, up to 49% FDI is permitted through the automatic route, while investments beyond 49% and up to 74% require government approval.
Strong YTD Returns Keep Sentiment Resilient
Despite recent weakness, PSU bank stocks have largely held on to their strong yearly performance, with more than half still posting gains of over 15%. Indian Bank continues to outperform, rising 49% so far this year and delivering a cumulative return of 940% over five years.
Canara Bank has surged 45% and is on track for its best annual performance since 2022, while Bank of India has rebounded strongly with a 37% gain. State Bank of India has returned 21% and other PSU banks such as Union Bank of India, Punjab National Bank and Bank of Baroda have also delivered healthy gains between 15% and 24%.
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