Nifty PSU Bank hits record high as rally extends to seventh session; Union Bank, Bank of India, SBI lead gainers

The state-run Indian banks are having a great run, marking their seventh day in a row with a positive close, bringing the Nifty PSU Bank Index touching a new record high. Although the overall market has largely held steady with a broad range, state-run Indian lenders have bucked this trend, showing aggressive buying, thereby indicating a massive shift of funds from growth-oriented banking stocks to value-oriented ones, owing to a dovish policy environment and structural reforms.

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The Technical Breakout

On Tuesday, 6 January, the Nifty PSU Bank index climbed 0.59% to end firmly in record territory at 8,790. Technically, this rally is important for at least three reasons. First, the index has returned a cumulative gain of almost 7% in one week, a feat seen very seldom and underlining the intensity of buying interest. 

The price action was broad-based-the 12 constituents of the index were all trading in the green. Such unanimity among constituents is a classic indicator of a healthy trend; for one, the rally is not being propped up by a single heavyweight but is a sector-wide re-rating.

Leading the Charge: Union Bank and Peers

The major gainers leading the pack today are Union Bank of India and the rest, with Union Bank leading the way by rising a sharp 3% to a high of ₹167. The stock movement indicates sharp accumulation, often an indicator of strong momentum. In the vicinity, others such as Bank of India and State Bank of India (SBI) also participated by rising by over 1%.

SBI's action is particularly notable. Along with such major players, there were moderate buyers in the mid-sized banks like Bank of Maharashtra, Canara Bank, Indian Bank, and UCO Bank.
The latest available bi-weekly data provided by the central bank has shown an increase in the growth of the total credits at 12% at the end of mid-December, compared to the growth of 11.5% as of the end of late November.
The industry and retail credit in November show a continued resurgence, and the pace is picking up. This is a positive indicator as it reveals the impact of reduced interest rates on the economic activities and the loan portfolios of the public sector banks.

Outlook

The Nifty Bank index scaled a fresh high of 60,437 during the week, maintaining a very positive mood in the market. The PSU bank rally could see further strength in the upcoming results season with a mix of technical support from fresh highs and strong fundamentals such as credit growth and clean balance sheets in the industry.