Nifty PSU Bank witnessed a sharp decline of over 4.4% in today’s trading session, marking its worst intraday drop in a year. Investor profit booking led to a sell-off in public sector bank stocks, with all 12 constituents of the index closing in the red. Among them, five experienced declines of more than 9%.
Central Bank emerged as the top loser with an 11.84% decline, followed by Bank of Maharashtra with a 10.2% cut. Punjab and Sind Bank, Indian Overseas Bank, and UCO Bank also ended with significant drops of 10%, 9.9%, and 9%, respectively.
Other major PSU banks like Bank of India, Union Bank of India, Indian Bank, Punjab National Bank, Canara Bank, Bank of Baroda, and State Bank of India saw their share values declining between 2% and 6.5%.
The Nifty PSU Bank index plummeted by 4.43% to 6637 points, its most significant intraday drop in the past year. This downward trend in banking stocks continued after the RBI’s decision to maintain the repo rate at 6.5% for the sixth consecutive time, with no hints of future rate cuts.
The absence of significant market triggers, along with postponed rate cuts from the US Fed, led investors to book profits in stocks that had recently surged, including PSU stocks. Additionally, weak earnings reported by major PSU companies for the December quarter further fueled profit booking.
The BSE PSU index, reflecting the performance of public sector enterprises, concluded with a decline of 4.44% at 17,564 points, with 55 out of 56 constituents ending the session in negative territory.
Overall, both the Nifty 50 and S&P Sensex settled with a drop of 0.75% each, resulting in collective losses of approximately ₹7 lakh crore for investors.
Vinod Nair, Head of Research at Geojit Financial Services, highlighted the uptick in exchange margin requirements, which led to decreased positions, especially in mid and small caps. Despite a robust economic forecast, slowing corporate earnings due to moderated operating margins pose a challenge for sustaining premium valuations. Large caps are expected to outperform amidst this consolidation period.