6 PSU bank stocks hit 52-week high post RBI MPC outcome

NEW DELHI: Led by a 7% rally in Central Bank of India, at least six PSU bank stocks on Wednesday hit fresh 52-week high levels. The rally in PSU bank stocks comes even as private bank stocks were mostly trading lower after RBI hiked interest rates by 35 basis points and maintained focus on withdrawal of accommodation, while supporting growth.

Shares of the Central Bank of India were up nearly 7% and also hit a fresh high of Rs 28.80 during the day. UCO Bank also rallied over 7% to hit a fresh 1-year high of Rs 22.65.

Bank of India, Bank of Baroda, Indian Bank and Punjab and Sind Bank also hit new record highs during the day.

RBI's measure to enhance the scope for government securities in HTM portfolio is a positive step especially for PSU banks), analysts said.

Led by strong growth in corporate loan books, PSU bank stocks have been rallying. Up around 67% so far in the year, Nifty PSU Bank is the top sectoral gainer in the calendar year 2022.

Typically, during a rising interest rate scenario, the banking sector passes on rate hikes through the floating rate loans while delaying the rate hikes for deposits, benefitting from spreads, and expanding margins. Banks report strong topline growth due to healthy disbursements, higher loan rates, and robust earnings growth on the back of promising advances.

"A change in stance to dovish going forward by RBI will lead to rally in the banking segment while a prolonged hawkish stance will impact deposit rates and lead to narrowing NIMs, more so for PSBs," said Anil Rego, founder and fund manager at Right Horizons PMS.

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