PSU bank stocks surge up to 11% following positive statements by PM Modi and Finance Minister Sitharaman

Indian Overseas Bank leads the gains, adding significant market capitalization

By Viditha Ganji On Aug 11, 2023

PSU bank stocks have witnessed a remarkable surge of up to 11% in trading, driven by comments made by Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman in the Lok Sabha on Thursday. State-run lenders such as Indian Overseas Bank and Central Bank of India are among the notable gainers, contributing to an overall increase in market capitalization.

Indian Overseas Bank has notably exceeded the Rs 30 mark for the first time since January of this year. In the current trading session, the bank’s shares have climbed 11%, significantly boosting its market capitalization by almost Rs 6,000 crore.

The statements made by Prime Minister Modi and Finance Minister Sitharaman have ignited this positive market response. Prime Minister Modi highlighted the recent doubling of net profits by PSU banks, attributing this achievement to corrective measures taken to address Non-Performing Assets (NPAs) and the prevention of evergreening of loans.

Minister Sitharaman further underscored the health of PSU banks, noting that they have recorded unprecedented profits amounting to Rs 1 lakh crore. She highlighted that both Gross and Net NPAs are at their lowest levels in nearly a decade, demonstrating the effectiveness of strategies undertaken to bolster the banking sector.

The Finance Minister also emphasized that the dividends earned by banks are directed towards public welfare, indicating their contribution to the broader economy.

Market expert Prakash Diwan expressed optimism about the long-term prospects of PSU banks, considering them as attractive opportunities that surpass short-term fluctuations. He specifically mentioned State Bank of India (SBI) as a standout performer within the PSU banking sector, citing its size and extensive reach as advantageous factors.

Amid these positive sentiments, the PSU Bank index has surged by 2%, and all 12 constituents of the index are currently trading with gains. The remarks by top government officials have bolstered investor confidence in the sector, leading to a significant rise in market valuations.