PSU Banks Rally As Lenders' To Gain From Lower Yields On G-Securities

In Friday's intra-day trade, Nifty PSU Bank index jumped the most over 3% ahead of Finance Minister Nirmala Sitharaman's meet with the chiefs of public sector banks on December 28.

The rally has been fuelled by RBI's announcement made on December 26 in which it plans for a second round of 'Operation Twist' on December 30. As part of the policy action, RBI would buy 10-year government bonds for Rs.10000 crore and at the same time sell 4 bonds of the same value maturing in 2020 through open market operation.

The measure is adopted by central banks when despite reducing interest rates, long-term rates continue to be high. This move will result in more treasury profits on bond portfolios for banks.

Among the top gainers from the PSU Bank pack have been Allahabad Bank which surged as much as 11% as the government infused fresh capital to the tune of Rs. 2153 crore. Other banks including Bank of Baroda, Syndicate Bank as well as PNB surged 4-5%.

SBI also gained 2% after global research firm Citi gave a 'buy' rating on the stock and increase target price from Rs. 375 to Rs. 400 per share. Other PSU banks including Indian Bank, OBC, Union Bank of India and Canara Bank were up 2-4%.

Meanwhile, Sensex was trading with gains of 294.91 points or 0.72% at 41,458.67 while Nifty scaled as much as 85.2 points or +0.70% to trade at 12211.75.

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