Govt unlocks banking, sets stocks free to soar higher

Mumbai: Banking and finance stocks surged Monday, their steepest climb in more than 10 months, after India proposed a bad bank to house loans gone sour. The proposed privatisation of IDBI Bank and two others, yet unnamed, underscored the Centre’s intent to enhance efficiency in the financing industry.

“The announcement of an ARC-AMC model can work like a bad bank and help the banking sector clean up the bad corporate loans,” said Abhijit Tibrewal, analyst, Reliance Securities. “That will make investors believe that some of the stressed banks can effectively leverage this to clean up and improve the asset quality of their books.”

Given the budget’s accent on boosting infrastructure, the bets are on lenders that will play key roles in bankrolling them. HDFC Bank and ICICI Bank are top picks for D-Street.


Both Nifty Bank and Nifty PSU Bank rose 8 per cent each Monday. But the 10-year benchmark yield pierced the 6 per cent-mark for the first time this year. “Bond yields will eventually go down with inflow of foreign funds, even though they have gone up due to higher government borrowings for funding deficits,” said Deven Choksey, MD, KR Choksey Shares.