PSU banks fuel the surge

All the top five gainers on the BSE, not surprisingly, are the PSU banks. The pack is led by PNB, followed by Bank of Baroda, Bank of India, State Bank of India and Union Bank. The surge in the market is mainly fueled by the BSE Bankex , which is up 3%.

The reason is obvious – the Govt’s recapitalization package for the PSU banks. The Govt would be infusing Rs.2.11 lakh crore in PSU banks. This would be over a period of two years.

The smart thing here, which seems more like “financial adjustment in the books” is the way in which this money is being provided – spread over a period of two years, 64% of this recap money, Rs.1.35 lakh crore would be in the form of bonds – recapitalization bonds. The balance, Rs.65,000 crore will be through the budget.