PSU bank shares make a comeback on JPMorgan’s index inclusion decision
PSU bank shares made a robust comeback on September 22 after a bruising selloff in the previous session, following JPMorgan’s decision to include Indian government bonds in its emerging-market index. The Nifty PSU Bank index was trading 1.79 percent up at 10.10 am, with all its 12 components trading in the green.
Analysts expect a significant boost to the domestic financial ecosystem if Indian government bonds are included in all three major EM bond indices. This could lead to total flows of at least $40-50 billion in the medium term, according to Satyakam Gautam, Rates trader at ICICI Bank.
However, some analysts are urging caution with regard to the PSU bank space. They warn that the smaller PSU banks have low floating stock and could fall sharply if a block comes to the market. They also point out that PSU banks such as UCO Bank, Punjab & Sind Bank, and Bank of Maharashtra have over 95 percent government shareholding and are on the divestment radar.
Overall, the outlook for PSU bank shares is mixed. Some analysts are bullish on the segment, citing the undervalued valuations and the readiness of PSU banks to fund the growth of the Indian economy. Others are more cautious, pointing to the risks of investing in smaller PSU banks and the potential for divestment in some of the larger banks.
Investors should carefully consider the risks and rewards before investing in PSU bank shares.
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