Budget 2022 failed to cheer investors of public sector banks as sectoral gauge Nifty PSU Bank declined more than 3 percent in intraday trade on Tuesday following Union Finance Minister Nirmala Sitharaman’s announcement. It was the worst-performing sector at the time of writing.
The downtrend came amid high volatility in the market as benchmark indices Sensex and Nifty50, which opened on a high note, gave up most of the day's gains after the Finance Minister unveiled the budget for the next fiscal.
While Sitharaman announced more credit lines for small businesses, the introduction of the central bank digital currency, digital banking push, and amendments to strengthen the bankruptcy law, there was no mention of promises of privatisation of public sector banks announced in the last union budget.
After the announcement, the shares of the State Bank of India, the largest public sector bank, corrected 3.3 percent in intraday trade and were down 0.85 percent at Rs 533.75 on the National Stock Exchange (NSE), at the time of writing.
Though the stock is in the red territory today, it has given a return of 71 percent to investors in the past year, as against the benchmark Nifty which has risen 22.85 percent during the period.
Union Bank stock, on the other hand, fell almost 5 percent to an intraday low of Rs 45.10 on NSE. It was trading 3.48 percent lower at Rs 45.75 at 2:30 pm. The stock was the top laggard in the Nifty PSU Bank, followed by Bank of Baroda (down 4.7 percent intraday), and Indian Overseas Bank shares (down 6.3 percent intraday) at the time of writing.
Punjab National Bank shares also slipped 3 percent in intraday trade and were trading at Rs 41.50, 0.12 percent lower from the previous close.
By 2:40 pm, a total of 21,55,87,321 shares of Nifty PSU Bank constituents worth Rs 2.80 lakh changed hands, NSE data showed.
While the Niti Aayog made recommendations to privatise banks like the Central Bank of India and the Indian Overseas Bank, the FM did not mention this in the budget, nor are the banking amendment bills required to move forward with privatization listed in this year’s budget session.
The big focus area for banking from the union budget over the years has been any announcements relating to the infusion of capital into public sector banks. However, that was ruled out on the back of improved health of the financial sector, and a reduction in bad loans. The Finance Minister did not announce any further capital for the state-run banks.
