Indices Hit New Highs, PSU Banks Lead with Big­gest Rally in 6 Months

Sen­sex gains 205 points to close at 32,514; the NSE Nifty ends day at 10,077.10

The Economic Times - - Companies: Pursuit Of Profit -

Mumbai: Bench­mark stock indices rose 0.6% to close at record high on Mon­day led by State Bank of In­dia, which jumped 4.5% af­ter the coun­try’s largest len­der slashed sav­ings bank in­ter­est rate. An­a­lysts said the near-term mar­ket prospects will de­pend on the out­come of the Re­serve Bank of In­dia’s mon­e­tary pol­icy re­view on Wed­nes­day when the cen­tral bank is ex­pected to cut in­ter­est rates by 25 ba­sis points.

BSE’s Sen­sex gained 205 points, or 0.6%, to close at 32,514. The NSE Nifty ended at 10,077.10, up 0.63%, or 63 points, over the pre­vi­ous close. Power Grid gained 4.2%, while Tata Steel, L&T, ONGC and ICICI Bank rose 2 to 3%. Among the Sen­sex stocks, 21 gained, while 10 fell. The Nifty PSU Bank in­dex gained nearly 3.6% on Mon­day — its big­gest sin­gle-day gain in six months — af­ter SBI slashed sav­ings bank in­ter­est rate to 3.5% from 4%.The move is ex­pected to boost PSU banks’ prof­itabil­ity.

“The re­duc­tions in in­ter­est rate on sav­ings ac­count are a big pos­i­tive for the en­tire bank­ing in­dus­try in terms of cost of funds,” said Gau­rav Dua, head of re­search at Sharekhan.

The SBI stock gained 4.5% to ₹ 312.55 while Bank of Bar­oda and Bank of In­dia gained 2.5% each. PNB shares rose 2.04% to ₹ 162.20.

As on June 30, SBI had nearly ₹ 9.4 lakh crore worth of sav­ings de­posit. A 50 ba­sis point cut in sav­ings bank ac­count rate will save nearly ₹ 4,000 crore an­nu­ally, ac­cord­ing to ana- lysts. For the year ended March 30, 2017, SBI posted a net profit of ₹ 10,509 crore.

“With this move, there is high pos­si­bil­ity that the one-year de­posit rates could also see some soft­en­ing while most of the banks will try and take a cut from SBI,” said Sid­dharth Puro­hit, bank­ing an­a­lyst at An­gel Broking. “The cost of bor­row­ings shall come down which will get off­set by the fall in lend­ing rates, but the net ef­fect should be ex­pan­sion in net in­ter­est mar­gin for SBI.”

The next trig­ger for bank stocks will be RBI’s pol­icy on Wed­nes­day. An­a­lysts said ex­pec­ta­tions of a 25 ba­sis point rate cut has been fac­tored in by the mar­ket. In­vestors will now watch the cen­tral bank’s com­ments on in­fla­tion and in­ter­est rate out­look.

Oil prices hit a two-month high, lifted by a tight­en­ing US crude mar­ket and the threat of sanc­tions against OPEC-mem­ber Venezuela. Brent crude fu­tures were at $52.85 per bar­rel, up 33 cents or 0.6%.

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