Shares in Public Sector Banks (PSBs) are seeing a sharp rally on hopes that asset quality would continue to see improvement.
SBI has also rallied almost 4 per cent in the last two days. The optimism has been growing ever since Bank of Baroda reported an improvement in its asset quality. This was followed by asset quality improvement from Union Bank of India and Oriental Bank of Commerce.
Analysts are now focusing on the results of State Bank of India to be delivered next week. Should there be an improvement in asset quality, one can expect a further rally in PSBs. There are also hopes that the Reserve Bank of India would cut interest rates in its policy meet on June 2, 2015.
This should augur well for PSBs, whose shares are nowhere near their highs they saw when Narendra Modi tookover as the Prime Minister of the country.