The Nifty PSU Bank index surged as much as 4.4% in intra-day trading, extending its gains for the second consecutive session after a 2.5% rise on June 5. This positive momentum follows confirmation that the BJP-led NDA will form the government at the Centre.
This uptick comes after a sharp decline of over 15% on June 4, driven by a tighter-than-expected election race where the Modi-led NDA did not secure as many seats as predicted by exit polls.
PSU Bank Constituents See Significant Gains
All PSU Bank constituents traded in the green during intra-day deals, with Indian Overseas Bank, CBI, Union Bank of India, and Bank of Maharashtra rising over 5% each. Additionally, Indian Bank, SBI, Bank of Baroda, Punjab and Sind Bank, and UCO Bank saw gains between 4-5%. Other notable performers included Canara Bank, Bank of India, and Punjab National Bank, each adding over 3%.
Index Performance
The Nifty PSU Bank index has jumped 72% over the last year and 28% in 2024 year-to-date. Despite shedding 1% in the three sessions of June and a 2.9% loss in May, the index was positive for six consecutive months prior. It rose 8.5% in April, 1% in March, 10.5% in February, and 9.8% in January.
Market Sentiment and Future Outlook
Investor sentiment towards PSU bank stocks has improved following the political stability confirmed by the 2024 Lok Sabha election results. The continued support of the National Democratic Alliance (NDA) for a third consecutive term has been a positive driver, reflecting in substantial gains for PSU stocks.
However, investor confidence in PSU banks remains cautious, contingent on coalition stability and governance. Analysts noted that the government might not operate as smoothly as it did in the past decade when the Prime Minister’s office had strong control over the government machinery. The BJP’s efforts to secure alliance partners could lead to significant policy changes and potentially disrupt growth momentum.
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