PSU Bank index jumps 4.4% on BJP-led NDA govt confirmation; IOB, CBI, Union Bank top gainers

The Nifty PSU Bank index surged as much as 4.4 percent in intra-day deals, extending gains for the second straight session, after jumping 2.5 percent yesterday, June 5 on confirmation that BJP-led NDA would form the government at the Centre.

This comes after an over 15 percent decline on June 4, Monday after the Modi-led NDA witnessed a tighter-than-expected election race and did not secure as many seats as predicted in the exit polls.

Read here: CLSA reshuffles India portfolio post election results; drops L&T, adds HCL Tech

All PSU Bank constituents were trading in the green in intra-day deals today with Indian Overseas Bank, CBI, Union Bank of India and Bank of Maharashtra rising over 5 percent each. Meanwhile, Indian Bank, SBI, Bank of Baroda, Punjab and Sind Bank, UCO Bank gained between 4-5 percent each.

Other stocks Canara Bank, Bank of India, Punjab National Bank also added over 3 percent each.

The index has jumped 72 percent in the last one year and 28 percent and 28 percent in 2024 YTD. The index has shed 1 percent in the 3 sessions of June after a 2.9 percent loss in May. However, before that it was positive in 6 straight months. This year, it rose 8.5 percent in April, 1 percent in March, 10.5 percent in February and 9.8 percent in January.

Read here: PSUs unlikely to re-rate, FMCG, private banks in focus after election results, says PL; lists top stock picks

PSU bank stocks surged as investor sentiment improved following the political stability confirmed by the 2024 Lok Sabha election results. Leaders of the National Democratic Alliance (NDA) pledged their support to form a government for a third consecutive term. Over the past decade, public sector undertakings (PSUs) have been significant beneficiaries under the NDA government, a trend reflected in the substantial gains of PSU stocks, with some delivering multi-bagger returns.

However, investor confidence in PSU banks remains uncertain, hinging on the stability of the coalition and how governance unfolds. UBS analysts cautioned 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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