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Why PSU Banking Stocks May Continue To See Momentum?

July 08, 2019 / Sunil Fernandes

PSU banking stocks may continue to see momentum in the coming days. The fresh impetus is likely from a couple of developments that have happened in the Union Budget. The first is that the government has decided to provide bank re-capitalization of Rs 70,000 crores to the banks. This is a pretty decent sum, but one would have to wait and see, which bank is allotted how much. The second big factor is that the government has decided to continue to move towards consolidating the fiscal deficit, which has been pegged at 3.3 per cent of GDP for 2019-20. What this means is that going forward we might see the RBI slashing interest rates, being content with the consolidation measures being adopted by the government. This is a positive move for banks, particularly the PSU banking stocks, as bond prices could rise. In fact, the pace and size of cut maybe faster and bigger as well. Another 50 basis points cut, cannot be ruled out.