PSU Bank Shares Hit Record High As Government Considers Raising Foreign Investment Limit For Growth

Business News: On September 24th, the stock market fell for the fourth consecutive day. The Sensex opened 184.45 points lower at 81,917.65 on Wednesday morning. The decline intensified shortly after, and the Sensex fell 382 points to 81,720.29. The NSE Nifty also fell 60.75 points to open at 25,108.75 and then fell to a low of 25,053.80. However, PSU bank stocks saw a significant surge.

Shares of SBI, Indian Bank, and Canara Bank, in particular, reached 52-week highs. It seems as if these stocks have found new strength. The biggest reason behind this is believed to be the government's plan to increase the foreign investment limit in PSU banks.

The government may increase the foreign investment  

According to a Mint report, the government is considering raising the foreign investment limit in PSU banks from the current 20% to 49%. However, the government itself will not allow its stake in the bank to fall below 51%, ensuring it retains control. This would result in a significant infusion of capital into the banks and boost investor confidence in the market. This is why PSU bank shares saw a significant surge today.

Great rise in PSU Bank index

While the rest of the stock market was weak, the PSU Bank index surged more than 1.5% to hit its highest level in the past year at 7,567.50. This is significant because today was not a good day for the overall market. SBI shares rose 1.13% to close at ₹880.50.

Canara Bank shares rose over 2% to close at a new yearly high of ₹124.55. Indian Bank jumped 3.8% to close at a new high of ₹722. Other large PSU banks, such as Bank of Baroda, Indian Overseas Bank, and Bank of India, also gained. However, some banks, such as Maharashtra Bank and Punjab National Bank, showed slight weakness.

The banking sector will continue to grow

PSU banks have also expressed positive expectations for their Q2 results. Bank of Baroda has predicted loan growth of around 4% or more. Punjab National Bank, Canara Bank, and Indian Bank are also expecting loan growth of around 2.5%. As for profit margins (NIM), some banks may see a slight decline, but this will not be a major setback.

SBI expects its loans to grow by 3%, with margins declining slightly by just 5 basis points. Experts believe that Bank of Baroda, SBI, and Punjab National Bank will deliver superior returns, making these three banks the most promising investment options.