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D-Street Buzz: PSU Banks rally led by IOB, PNB; State Bank of India edges towards record high –

The Indian stock market has scaled new highs largely led by banks. Sensex is up 278.07 points or 0.47% at 59001.27, and the Nifty added 69.30 points or 0.40% at 17588.80.

Nifty PSU Bank jumped over 3 percent led by Indian Overseas Bank which jumped over 7 percent followed by PNB, UCO Bank and Central Bank of India.

Banks are in focus as Finance Minister Nirmala Sitharaman is likely to announce sovereign guarantee for ‘bad bank’ today. Moneycontrol learns she is likely to announce a formal government guarantee on the securities receipts that the planned ‘bad bank’ will issue to banks as it takes on non-performing assets from their books.

It is understood that the Union Cabinet, on September 15, had approved the proposal to formalise sovereign backing for the securities receipts issued by the National Asset Reconstruction Company Ltd (NARCL). The Cabinet nod will pave the way for the operationalisation of NARCL.

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As per reports, the NARCL would buy bad loans at 15 per cent cash and the remaining 85 per cent would be in security receipts guaranteed by the government.

In August, the Indian Banks’ Association (IBA) had moved an application to the Reserve Bank of India (RBI), seeking licence to set up the Rs 6,000-crore NARCL. It was incorporated last month in Mumbai, following the registration with the Registrar of Companies.

On September 15, the Union Cabinet announced a moratorium of four years for the payment of the Adjusted Gross Revenue (AGR) dues, providing a relief to the debt-strapped telcos – Vodafone Idea and Bharti Airtel.

Vodafone Idea’s gross debt, as on March 31, 2021, is estimated to be at least about Rs1.9 lakh crore. Eight top banks led by SBI have large exposure to the firm. In terms of percentage to book, IDFC First Bank, YES Bank and IndusInd Bank top the list.

SBI has around Rs 11,000 crore exposure to Vodafone Idea which constitutes 0.5 percent of its loan book whereas IDFC First has Rs 3,240 crore exposure which is around 3 percent of the loan book.

Among the most active shares, the top names included YES Bank followed by PNB, IDFC First Bank, Bank of Baroda and State Bank of India.

According to Santosh Meena, Head of Research at Swastika Investmart, one can expect a move towards the 37,700-38,000 zone. On the downside, 36,000 is strong support; below this, we can expect any weakness towards 35,500/35,000 levels.

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