Nifty PSU Bank tumbles over 4.4% to record worst intraday drop in a year; here’s how PNB, BOI, SBI and others performed

Public sector bank stocks witnessed a sharp sell-off in today's trading session as investors engaged in profit booking. All 12 constituents of the index closed in the red, with five of them experiencing declines of over 9%.

Central Bank emerged as the top loser with a decline of 11.84%, reaching ₹59.95 apiece, followed by Bank of Maharashtra, which saw a cut of 10.2% to ₹55.3 apiece. Similarly, shares of Punjab and Sind Bank, Indian Overseas Bank, and UCO Bank ended with drops of 10%, 9.9%, and 9%, respectively.

Additionally, Bank of India, Union Bank of India, Indian Bank, Punjab National Bank, Canara Bank, Bank of Baroda, and State Bank of India all saw their share values decline between 2% and 6.5% during today's session.

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Consequently, the Nifty PSU Bank index plummeted by 4.43% to 6637 points, marking the most significant intraday drop in the past year. The last such significant intraday drop was recorded by the index in February of the previous year, with a decline of 5.68%.

Banking stocks continued their weak performance following the RBI's sixth monetary policy meeting, in which the central bank decided to maintain the repo rate at 6.5% for the sixth consecutive time. Furthermore, the absence of cues from the RBI regarding future rate cuts is also impacting banking stocks.

Additionally, there are no imminent market triggers, as events such as the interim budget and the MPC meeting have concluded. At the same time, rate cuts from the US Fed have been further postponed against market expectations, which led investors to book profit in stocks that have recently gained sharply, and PSU stocks are some of them.

Apart from the PSU banking stocks, the overall PSU basket ended today's session deeply in the red as major companies reported weak earnings for the December quarter so far, prompting investors to book profits.

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The BSE PSU index, a barometer of public sector enterprises' performance, concluded today's session with a decline of 4.44% at 17,564 points. Of the 56 constituents of the index, 55 ended the trading session in negative territory.

Looking at the benchmark indices, both the Nifty 50 and S&P Sensex settled with a drop of 0.75% each. Amidst this significant downturn, investors have collectively lost approximately ₹7 lakh crore.

Commenting on today's market performance, Vinod Nair, Head of Research, at Geojit Financial Services, said, "An uptick in exchange margin requirements caused a decrease in positions, primarily in mid and small caps. Aside from the pharma and IT sectors, selling was widespread, with notable struggles seen in PSU banks."

"The premium valuation gap between mid- and large caps has notched to its all-time high. Despite a robust economic forecast, corporate earnings are expected to slow due to moderated operating margins. It is going to be a challenge for the broad market to sustain the premium valuation. Large caps are predicted to excel amid consolidation," he added.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.