State-owned banking stocks jumped sharply during the latter half of the trading session on Friday, May 30, as investors pumped the Nifty PSU Bank index with significant capital. Investors turned richer to the tune of Rs 3.7 lakh crore following the jump in the index.
The public bank index was seeing choppy trade through the session, but a sudden breakout led to the index rallying three percent in trade. At 1.50 pm, the index was quoting 6,983.80, surging three percent in trade, with all index constituents trading in the green.
Bank of Maharashtra, Indian Overseas Bank and Union Bank of India were the top gainers on the index, soaring between 4.5 to 5.5 percent in trade.
Further, Moneycontrol exclusively reported that within days of receiving a go-ahead from the Reserve Bank of India to operate as a wholly-owned subsidiary in India, highly-placed sources have told Moneycontrol that the Dubai-headquartered Emirates NBD has had a conversation with DIPAM on valuations, and has offered $6-7 billion in an all-cash deal for a 61 percent stake in IDBI Bank, giving it a majority control.
At the current market capitalisation of around Rs 1 lakh crore (~$11 billion), this translates into a cash payout of Rs 50,000-60,000 crore for the IDBI Bank stake. The proposed stake sale is valued at a significant premium to the share price of IDBI Bank in January 2023, when the bidders furnished their expression of interest for the lender.
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Ruchit Jain, Vice President of Technical Research at Motilal Oswal Financial Services said, "The PSU stocks have seen lot of buying interest in last few weeks. The upmove started with rally in defence PSU names and now buying interest is seen in PSU banks post the recent results."
He added that certain PSU banks have declared better than expected results and valuations are much comfortable. Also, there's a widespread anticipation of RBI cutting interest rates and hence, he expects the PSU banks to outperform in the near term.
Kranthi Bathini, Director - Equity Strategy at WealthMills Securities added that the favourable valuations in the public banking space have also caused further buying interest.
On the technical front, A R Ramachandran of Tips2Trade shared that a sharp recovery in PSU bank leader State Bank of India has led to Nifty PSU Bank to a 6 month high.
"A close above the major resistance of 6,845 can lead to a target of 7,115 for the index in the near term. However, the daily RSI is also getting a little overbought. Investors are advised to trade cautiously now and keep booking profits at intraday resistances of 7,051 and 7,115 in the near term."
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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