On pleasant Wednesday morning, when traders just started the day, markets took them to edge of their seat. Government owned banks rallied massively, NSE Nifty PSU Bank Index (Index composed of major PSU banks and tracks the overall performance of PSU Banking sector) soared 24% intraday. Bank Nifty Index, SBI, PNB, Bank of India and other PSU Bank shares opened with massive gap up.
Biggest PSU lender SBI surged 26%, its biggest single day jump since January 1994. PNB rose 36%, Bank of Baroda was up 26%, while BOI and Union bank of India rallied 21%. Other top gainers are Oriental Bank of commerce rose 19%, UCO Bank rallied 16% and Andhra Bank gained 15%, probably few minutes after the market open.(High speed news reading algorithms might have driven the price and of course retail traders would’ve hardly captured these moves!) We cover about using Price action to spot these algorithms in our course
What’s the reason for this kind of massive Price action?
On Tuesday Evening, Government announced 2.11 trillion rupees recapitalization stimulus package for PSU banks to rebuild growth and Investments. Package will give PSU banks with much-needed capital surplus for lending and revive investments. Increase in lending will lead to improvement in Bank’s assets and rise in interest income. (Yeah on the flip side, if PSU banks again involve in indiscriminate lending practices it may build up Non-performing assets, RBI has taken serious policy measures to avoid it.)
Market participants such as Domestic institutions perceived the news in positive light, have placed limit orders even before the market open made prices to shoot up in unprecedented scale. Traders should avoid jumping in the fear of missing out the moves. If market conviction is to rally further, we may getpullbacks to initiate trades. Monitor Price action and Trade accordingly.
