Neal Bhai Reports — PSU Banks Surge in a Flat , Market on Rate Cut Hopes — Shares of public sector banks surged up to 6% in an otherwise dull trading session on Wednesday as a fall in retail inflation in August bolstered expectations of a RBI rate cut.
India’s retail inflation eased to 5.05% in August and industrial output fell 2.5% in July , making a strong case for RBI governor Urjit Patel to cut rates in the next policy review on October 4.
“The data was benign and monsoon has been good, so there’s scope for a rate cut of 25 basis points in October. This trading rally may continue but one should look out for global hic cups also,“ said Neal Bhai,
After losing 6% in the last two sessions, Nifty PSU Bank index regained part of the losses, ending up 2.6% at 3,213.40 points led by Oriental Bank, Canara Bank, Bank of India, Bank of Baroda, State Bank of India and Indian Overseas Bank that rose between 2% and 6%. Nifty gained 0.1% to end at 8,726.60 points.
“Market is at a level where people are trying to find value wherever stocks are trading far away from 52-week high. Also, rate cut expectations could be among the reasons for the rise. Even if a rate cut doesn’t happen, banks are likely to see decent profits from treasury as bonds have moved a lot and the general sense is that things will improve on the NPA front,“ said Piyush Garg, CIO, ICICI Securities.
Due to the high beta nature of these stocks, they are prone to a fall in case there is any negative fallout from a global event. — Gold Silver Reports