Shares of PSU banks saw strong gains in an otherwise weak market on Tuesday. Reports have surfaced that the finance ministry is expected to infuse Rs 40,000 crore in state-owned banks in order to increase their lending capacity and strengthen the banks’ balance sheet.
The announcement may happen during the 2019 Budget presentation on July 5, The Economic Times reported, adding that the ministry may decide to infuse cash after the announcement of the first-quarter earnings of the current fiscal.
Expectations of the Reserve Bank of India (RBI) monetary policy committee reducing the interest rate by 25 bps for the third time in a row also reinstated the sentiment.
As of 11:15am, Nifty PSU Bank index went up over 1.5 percent led by gains in Oriental Bank of Commerce, Union Bank of India, Syndicate Bank, Allahabad Bank, and Bank of India, which were up in the range of 3-8.5 percent. In comparison, the Nifty was trading 0.4 percent (48 points) lower at 12,040.
As reported by CNBC-TV18, Around 70 percent of the economists polled expected the repo rate to be slashed by a quarter of a percentage point, while 10 percent expect a 35 basis point cut. Furthermore, 10 percent expect it to be down by 50 basis points and the rest expect a status quo on rates.
For the fiscal year 2020, a majority of the respondents expect 50 basis points cut, 10 per cent expect the rate to be cut by 100 basis points and the remaining expect it to be cut by 75 basis points. This includes the 25 basis points cut in the April policy this year.
