Indian stock benchmark indices hit record highs on Monday as stocks reacted to exit poll predictions of a likely landslide victory for the Narendra Modi-led BJP government. Shares of PSU banks rose up to 8 per cent in intra-day trade on BSE on Monday.
This positive wave has pushed PSU bank stock prices to new records. Markets strengthened on expectations of Prime Minister Narendra Modi winning a third term in office, reflecting confidence in government leadership and its impact on the financial environment.
Shares of Bank of Baroda surged 8% to Rs 286, while Indian Overseas Bank rose 6% in early trade. SBI, India's largest PSU bank, rose 6.6%. Canara Bank and Indian Bank also jumped more than 5%.
Bank of India, Union Bank of India, UCO Bank, Central Bank, Punjab & Sind Bank, PNB, Bank of Maharashtra also offer up to 4% rose.
Most exit polls showed that the BJP-led NDA coalition would easily win 350 to 390 of the 543 seats in the Lok Sabha, India's lower house of parliament.
A party or coalition needs 272 seats in parliament to form a government. The National Democratic Alliance (NDA), the BJP-led alliance, is expected to achieve this target, winning about two-thirds of the seats, according to exit polls.
Expectations that the BJP will return to power in the Lok Sabha elections were further strengthened by its victory in three of the four major state elections in December. Analysts had previously pointed out that India's ongoing economic reforms would be a positive factor for the country's financial markets if the BJP comes to power.
In recent years, the performance of public sector banks (PSBs) has experienced notable changes. After recording an unprecedented loss of Rs. In fiscal 2018, PSBs achieved a record revenue of Rs 85,390 crore. In fiscal year 2024, it is $1.4 billion. PSB's net profit has more than quadrupled over the past three years.
Key drivers for this turnaround include significant financial gains, significant reduction in non-performing assets (NPAs), and lower provisions that have strengthened the balance sheet overall. PSBs also delivered robust revenue growth, with credit growth of 16.1% in fiscal 2024, the highest in a decade.
As of 2024, public sector banks are in their strongest position in decades. They are delivering strong performance across all fundamentals: business growth, asset quality, profitability and capital adequacy.
According to analysts, business growth was reported in double digits, gross NPAs were at less than 3%, the lowest in a decade, and profitability was at an all-time high. Additionally, all banks are said to be well capitalized to the extent that they exceed regulatory requirements.
Meanwhile, during Modi 2.0 (June 2019 to May 2024), 10 out of 12 PSU bank stocks achieved multibagger returns of up to 473%.
According to data from Ace Equity, Indian Overseas Bank was the best performer among PSU banks with a return of 473% during the Modi 2.0 tenure. Bank of Maharashtra and UCO Bank followed with returns of 325% and 226% respectively. Also, Central Bank of India, State Bank of India (SBI), Indian Bank, Canara Bank, Punjab & Sind Bank, and Union Bank of India. of India, Bank of Baroda recorded returns ranging from 106% to 150% compared to the previous quarter. Five years.
Last week, CLSA identified SBI, Canara Bank and Bank of Baroda from the list of 54 Modi stocks.
“Modi stocks” are stocks of companies or sectors that have directly benefited from Prime Minister Narendra Modi’s government policies and initiatives, making them attractive to investors looking to capitalize on government-led growth.
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