Banking stocks gain for second session on govt’s lower borrowing programme

Mumbai: Banking stocks on Tuesday extended their gains as bond yields fell over 25 basis points after the government announced lower-than-expected borrowing programme for the fiscal year 2019.

Corporation Bank rose 5.5%, IDBI Bank 3.3%, Bank of Baroda 2.9%, Oriental Bank of Commerce 2.2%, Union Bank of India 2%, Allahabad Bank 2%, Indian Bank 2%, Syndicate Bank 1.9%, Bank of India 1.9%, Punjab National Bank 1.8%, Andhra Bank 1.6% and State Bank of India was up 1.5%.

Nifty PSU Bank Index gained 2% on Tuesday a day after it rallied nearly 5%. So far this year, Nifty PSU Bank Index has declined 22%. Benchmark Sensex index rose 0.6% to 33,255.60 points on Tuesday.

The yield on India’s benchmark 10-year government bond was trading at 7.371%, down 25.20 basis points, its biggest decline since 25 November 2013, compared to its Monday’s close of 7.623%. Bond yields and prices move in opposite directions.

“Fall in yields likely to reduce Treasury losses for banks ahead of year end, and low yields would likely to give more competition to banks in lending space,” said Soumyajit Niyogi, associate director at India Ratings and Research Pvt. Ltd.

The government on Monday announced that it will raise Rs2.88 trillion by selling bonds in the six months to 30 September, about 48% of its budgeted amount for the full fiscal year.

For FY19, the total gross borrowings through government securities is budgeted at Rs6.05 trillion, higher than previous year’s revised estimated of Rs5.99 trillion.

Bond yields were under pressure and have surged over 100 basis points from the last six months due to concerns of rising crude oil prices, widening current account deficit, reduction in banking liquidity and the prospect of faster rate hike by the US Federal Reserve.

Government banks are staring at a potential mark-to-market loss of Rs20,000 crore ($3 billion) in the March quarter, three times more than in the period to December, Bloomberg reported, quoting a Credit Suisse Group AG report.livemint

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