Shares of State Bank of India (SBI) — the country's largest bank — zoomed over 20 percent in early Wednesday trade after the government's announcement to recapitalise public sector banks (PSBs) with Rs 2.11 lakh core.
Shares of SBI opened at Rs 279.95 of Wednesday and hit a 52-week high of Rs 316.45. Considerable amount of shares changed hands as volume spurted 9.69 times from a two-week average of 8.54 lakh shares.
The bank added more than Rs 50,000 crore in its market capitalisation in Wednesday's session alone.
After the sudden announcement of Rs 2.11 lakh crore capital infusion roadmap, SBI Chairman Rajnish Kumar said the move will trigger economic activities.
"This milestone announcement on recapitalising banks in one go is a bold and courageous move and was indeed the need of the hour. It will generate balance in overall demand and supply by bringing more investments in sectors like infrastructure," Moneycontrol quoted Kumar as saying.
Shares of other PSBs are also rallying. Punjab National Bank (PNB) soared as much as 36 percent to Rs 193.45, the highest since its listing in 2002.
Bank of India, Bank of Baroda, Canara Bank and Union Bank of India were up between 22 percent and 27 percent.
On the other side, the Nifty PSU Bank index recorded its sharpest intra-day gain of 21 percent after the government's announcement. The Nifty PSU Bank index had shed over 500 points on account of weak second quarter results just last week.
"The move is a positive from a macro growth perspective as it address the important issue of bank recapitalisation, with fresh capital banks can now take more aggressive haircuts and thus will help to expedite the process of resolution of stressed assets, and will incentivise fresh credit disbursement," Business Standard quoted Antique Stock Broking.
Capital infusion was a long-standing demand of the state-owned banks, as the asset quality of these banks have grossly worsened due to increasing non-performing assets.