Modi booster gives stock investors Rs 2 lakh crore in a day; banks contribute half
The Modi government’s booster dose for domestic banks and the infrastructure sector gave stocks a big lift on Wednesday, helping the benchmark Sensex its highest daily gain in five months in absolute terms, while the Nifty logged the best show in five months. Both the indices scaled new lifetime peaks – Sensex at 33,042.50 and Nifty at 10,295.35.
The rally made stock investors richer by Rs 2 lakh crore as BSE’s total marketcapitalisation rose from Rs 1,39,83,014.84 crore to Rs 1,41,79,644.23 crore. Public sector banks alone contributed half of this gain. After a long depression, the Modi government gave investors of PSU bank stocks a day in the sun.
The Rs 2.11 lakh crore bank recapitalisation scheme that the Union Cabinet cleared on Tuesday sent the PSU bank stocks soaring on Wednesday.
Within minutes, India’s largest lenderSBI and four other top PSU lenders in terms of market capitalisation added nearly Rs 70,000 crore to stock investors’ wealth. Later on, those five stocks rallied further to add Rs 1 lakh crore to their m-cap.
Shares of PNB jumped 46.20 per cent, while those of SBI, Bank of Baroda andBank of India soared 27.58 per cent, 31.47 per cent and 33.96 per cent, respectively. Canara Bank zoomed 38.05 per cent. Others, too, followed suit.
Banking counters were seeing plentiful of shorts creations over the past few weeks, and the government bonanza kicked off a rush to cover these positions, which led to the big jump.
“We are not seeing material net buying per se. We could see portfolio repositioning away from private banks and NBFCs towards state-owned banks a bit, because SOE banks are under-owned in general. Having said that, what we are seeing today is also possibly the technical part. A lot of investors were looking at hedging their long exposures on the private banks through shorts on SOE banks,” said Gautam Chhaochharia, Head of India Research of UBS.
With a 25 per cent jump, SBI alone added Rs 60,597 crore to its market capitalisation at Rs 2.80 lakh crore. The stock settled 27.58 per cent higher at Rs 325.
Among other big PSU players, Bank of Baroda added Rs 10,380 crore to the investor kitty. PNB with a 50 per cent jump was the biggest gainer in the league. The stock rose 46.20 per cent to Rs 202, commanding an m-cap of Rs 42,963 crore, up Rs 13,576 crore from Tuesday’s close. Canara Bank and Bank of India added Rs 7,209 crore and Rs 5,650 crore, respectively, to their m-cap.
“We are positively surprised by the quantum of bank recapitalisation and it matches our estimates of capital requirements for PSU banks for both non-performing asset ( NPA) provisioning and some growth. Assuming that the entire infusion is equity in nature, there would be significant dilution for minority investors. But as current prices are higher than FY17 adjusted book values for most PSU banks, this recap packages should drive a re-rating in PSU banks,” Nomura India said in a note.
Overall, these five PSBs added Rs 97,413 crore to investor wealth, as their combined market-cap rose to Rs 4.15 lakh crore from Rs 3.17 lakh crore.
Nomura sees PNB to be the biggest beneficiary of the announcement as its adjusted book multiples on FY17 basis were higher than that of BOI or Union Bank. Besides, PNB is more sensitive to capital availability than SBI or BOB.
Brokerage Motilal Oswal Securities believes of the total allocation of Rs 2.1 lakh crore, Rs 75,000-80,000 crore will be utilised to meet Basel III capital requirements and support business growth. It expects the rest Rs 1.3 lakh crore to be used for higher provisions.
“Banks which are short on capital and have higher quantum of bad loans will stand to benefit more. We reiterate our buy ratings on PNB, SBI and BoB,” the brokerage said
The rally made stock investors richer by Rs 2 lakh crore as BSE’s total marketcapitalisation rose from Rs 1,39,83,014.84 crore to Rs 1,41,79,644.23 crore. Public sector banks alone contributed half of this gain. After a long depression, the Modi government gave investors of PSU bank stocks a day in the sun.
The Rs 2.11 lakh crore bank recapitalisation scheme that the Union Cabinet cleared on Tuesday sent the PSU bank stocks soaring on Wednesday.
Within minutes, India’s largest lenderSBI and four other top PSU lenders in terms of market capitalisation added nearly Rs 70,000 crore to stock investors’ wealth. Later on, those five stocks rallied further to add Rs 1 lakh crore to their m-cap.
Shares of PNB jumped 46.20 per cent, while those of SBI, Bank of Baroda andBank of India soared 27.58 per cent, 31.47 per cent and 33.96 per cent, respectively. Canara Bank zoomed 38.05 per cent. Others, too, followed suit.
Banking counters were seeing plentiful of shorts creations over the past few weeks, and the government bonanza kicked off a rush to cover these positions, which led to the big jump.
“We are not seeing material net buying per se. We could see portfolio repositioning away from private banks and NBFCs towards state-owned banks a bit, because SOE banks are under-owned in general. Having said that, what we are seeing today is also possibly the technical part. A lot of investors were looking at hedging their long exposures on the private banks through shorts on SOE banks,” said Gautam Chhaochharia, Head of India Research of UBS.
With a 25 per cent jump, SBI alone added Rs 60,597 crore to its market capitalisation at Rs 2.80 lakh crore. The stock settled 27.58 per cent higher at Rs 325.
Among other big PSU players, Bank of Baroda added Rs 10,380 crore to the investor kitty. PNB with a 50 per cent jump was the biggest gainer in the league. The stock rose 46.20 per cent to Rs 202, commanding an m-cap of Rs 42,963 crore, up Rs 13,576 crore from Tuesday’s close. Canara Bank and Bank of India added Rs 7,209 crore and Rs 5,650 crore, respectively, to their m-cap.
“We are positively surprised by the quantum of bank recapitalisation and it matches our estimates of capital requirements for PSU banks for both non-performing asset ( NPA) provisioning and some growth. Assuming that the entire infusion is equity in nature, there would be significant dilution for minority investors. But as current prices are higher than FY17 adjusted book values for most PSU banks, this recap packages should drive a re-rating in PSU banks,” Nomura India said in a note.
Overall, these five PSBs added Rs 97,413 crore to investor wealth, as their combined market-cap rose to Rs 4.15 lakh crore from Rs 3.17 lakh crore.
Nomura sees PNB to be the biggest beneficiary of the announcement as its adjusted book multiples on FY17 basis were higher than that of BOI or Union Bank. Besides, PNB is more sensitive to capital availability than SBI or BOB.
Brokerage Motilal Oswal Securities believes of the total allocation of Rs 2.1 lakh crore, Rs 75,000-80,000 crore will be utilised to meet Basel III capital requirements and support business growth. It expects the rest Rs 1.3 lakh crore to be used for higher provisions.
“Banks which are short on capital and have higher quantum of bad loans will stand to benefit more. We reiterate our buy ratings on PNB, SBI and BoB,” the brokerage said
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