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PSU banks gain on surprise CRR cut by RBI

Friday, 10 October 2008

Despite the stock market plunging, repeated assurances by Finance Minister P Chidambaram on India’s strong fundamentals and RBI's surprise 150 bps CRR cut to induce liquidity helped many public sector banks to post gains on Friday.

Analysts view of banking that PSBs have better future outlook as they are less exposed to unsecured loans.

The shares of many PSU banks recovered from their early lows on hopes that RBI's move to release Rs 60,000 crore in the banking system would help the banks facing liquidity crunch in the background of financial crisis across the globe, brokers said
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The expectation that state-run banks are well structured and comparatively less exposed to overseas markets also helped the stocks to remain positive, said Sanjeev Prasad, head research, Kotak Mahindra Securities.

He believes that banks like Punjab National Bank and Union Bank of India are good investment options and have good prospects ahead.
 
State Bank of India, Union Bank, Canara Bank, Oriental Bank of Commerce closed in the green with a positive gap of 1.5% to 3.5 %, while leading private banks like ICICI Bank and HDFC Bank plummeted on heavy selling pressure.

There was talk in the market that people were pulling out from ICICI Bank and HDFC Bank and putting money in some of the PSBs, after rumours resurfaced that ICICI Bank is on the verge of collapse and customers were closing their accounts with the bank.

Banking analysts are of the view that PSBs have better future outlook as they are less exposed to unsecured loans and thus would be less impacted by the present financial crisis.

Source: http://economictimes.indiatimes.com