The Nifty PSU Bank index plunged 271 points or 3.2% to hit the day’s low of 8,514.90. All 12 stocks were trading in the red around 2 PM.
Indian Bank was the worst hit, falling up to 7% while Punjab National Bank (PNB), Canara Bank were next in line with over 4% fall by each.
Others, including Bank of India (BoI), Bank of Baroda (BoB), Central Bank of India, Punjab & Sind Bank (PSB), Union Bank, Uco Bank, Bank of Maharashtra and Indian Overseas Bank (IOB) were down between 3.6% and 1.4% around this time.
India’s largest public lender, the State Bank of India (SBI) slipped 1.6%.
With the Nifty sliding for the fourth day in a row as rupee weakness continues to weigh on the overall markets, PSU bank stocks felt heightened selling pressure because of the FDI development. Moreover, the rupee’s slide has also given a fresh setback to the likelihood of a rate cut by the Reserve Bank of India (RBI).
“PSBs witnessed profit taking today on the back of a denial by the finance ministry to increase the FDI limit in PSBs. It was accentuated by lower probability of rate cut by RBI in the ensuing MPC meeting in the backdrop of the USDINR hitting life lows and strong GDP numbers,” Sunny Agrawal, Head – Retail Fundamental Desk at SBI Securities said.
Agrawal said that a weaker INR will exert selling pressure from foreign investors who usually tend to book profits after a strong rally.
The PSU bank stocks have seen up to 20% rally in the past three months.
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On Tuesday, Minister of State for Finance Pankaj Chaudhary, replying to a written query, told the Rajya Sabha that the government has not proposed increasing the FDI limit in public sector banks (PSBs).
In case of private sector banks, up to 49% of FDI is through the automatic route and beyond 49% and up to 74%, the government route is applicable.
Replying to another question, Chaudhary said the Union Government’s holdings in 12 public sector banks (PSBs) have not declined since 2020.
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