Bank Nifty plunges over 900 points, new PNB fraud mostly to blame

Banking benchmark index, Bank Nifty shredded over 900 points on Monday, the week's opening trading session before pulling back slightly at the fag end of trading day.

Nifty PSU Bank index witnessed a correction of over 5 per cent despite the government allocating capital infusion of Rs 70,000 crore to the sector in the Budget 2019 proposals. IANS

Banking benchmark index, Bank Nifty shredded over 900 points on Monday, the week's opening trading session before pulling back slightly at the fag end of trading day. The Nifty PSU Bank index witnessed a correction of over 5 per cent despite the government allocating capital infusion of Rs 70,000 crore to the sector in the Budget 2019 proposals. The banking sector took a sharp slide after the sentiment was also hit due to the news of the new Punjab National Bank (PNB) fraud. The PSU bank on Monday slipped 11 per cent intra-day, falling to Rs 73 on the BSE, after the state-owned bank reported a fraud of Rs 3,805 crore by Bhushan Power & Steel Ltd (BPSL) to Reserve Bank of India.

Commenting upon the index's behavior today, Head research, Joindre Capital Services, Avinash Gorakshakar told Zee Business Online, ''The Bank Nifty witnessed a correction largely due to the sentimental effect of PNB fraud news. Also the market is expecting poor numbers from PSU banks in the June quarter. Despite the positive announcement made in the budget, that promised a capital infusion of Rs 70,000 crores in PSU banks, the index is trading negative on street.''

PNB informed that BPSL had misappropriated bank funds and had manipulated its books of accounts to raise funds from consortium of lenders. The PSU bank, PNB was trading at Rs 73, losing 8.75 points or 10.76% at 300 hrs. As far as other PSU's are concerned, the Canara Bank was trading lower by 6.59 percent while Union Bank was down 6.84 percent. Meanwhile, other PSU banks like Allahabad Bank, Syndicate Bank, Bank of Baroda and State Bank of India fell nearly 5-4 percent.

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However, the broader reason behind the banking index correction is the minimum public shareholding (MSP) in the PSU banks. The government has 80-93 percent stake in most PSUs, and reducing the promoter stakes further to 75 percent could pose pressure on revenues as the banking, NBFC and HFC sectors are already suffering from liquidity crunch crisis. Also the government's nod to capital infusion of Rs 70,000 crore package is a positive announcement but it is expected to be released little late, which may effect the index further.

At 15:12 hrs, the banking index, Bank Nifty was trading 30,595.55, down by 880.25 points and 2.80. Meanwhile the private bank shares like HDFC Bank, ICICI Bank, Axis bank and Kotak Mahindra Bank were trading in red, losing over 2 to 3%. However, the only private bank that was trading green in the same situation was Yes bank, which surged over 5% at Rs 93 per share at 312 hrs. While the index ended the session at 30,603.85, down by 871.95 points or 2.77%.

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