Bank of Maharashtra, UCO Bk, IOB: PSBs rise up to 6% on June 2; here's why

Business Standard

3 days ago

PSU Bank stocks rise: PSU bank stocks were in the spotlight on the first trading day of June—Monday, June 2, 2025—with several counters rallying up to 6 per cent in intraday deals. The surge came ahead of the Reserve Bank of India's (RBI) monetary policy committee (MPC) meeting outcome, scheduled for Friday, June 6.
The Nifty PSU Bank index rose as much as 1.96 per cent to hit an intraday high of 7,010.45, with all its constituents trading in the green. In comparison, the Nifty50 index was trading 0.49 per cent lower at 24,630.50 level at 11:15 AM.
Among individual stocks, UCO Bank led the gains, jumping 6.14 per cent to ₹35.08, followed by Central Bank of India, which advanced 5.80 per cent to ₹41.20. Bank of Maharashtra climbed 5.52 per cent to ₹56.96, while Indian Overseas Bank added 5.09 per cent to ₹41.87. Punjab & Sind Bank was up 4.18 per cent at ₹33.33, and Union Bank of India rose 4.49 per cent to ₹153.39.
Indian Bank gained 3.25 per cent to ₹636.70, Punjab National Bank advanced 3.19 per cent to ₹109.20, and Bank of India traded higher at ₹125.42. Bank of Baroda was up 2.68 per cent at ₹256.25, Canara Bank gained 1.82 per cent to ₹116.85, and State Bank of India (SBI) rose 0.68 per cent to ₹817.90.
Why were PSU Bank stocks buzzing in trade?
Public sector bank (PSU) stocks were in focus ahead of the Reserve Bank of India's (RBI) monetary policy committee (MPC) outcome, scheduled for Friday, June 6, 2025.
According to a Business Standard poll, nine out of 10 respondents expect the MPC to cut the repo rate by 25 basis points (bps) to 5.75 per cent, while the State Bank of India has forecast a deeper 50-bps cut.
The six-member committee will begin its three-day meeting on June 4, with the policy review announcement due at the end of the week.
All respondents agreed that the RBI is likely to lower its FY26 inflation projection from the current 4 per cent forecast made in April.
With inflation softening and growth picking up, the central bank is seen continuing its shift toward an accommodative policy stance. The MPC had already reduced the repo rate by 25 bps each in February and April after keeping it steady for 11 consecutive meetings. READ MORE
Robust GST collections
Meanwhile, strong tax collections added to the upbeat mood. Net GST receipts grew 20.4 per cent year-on-year (Y-o-Y) to ₹1.73 trillion in May, boosted by a 72.9 per cent jump in Customs-related revenue and a decline in refund outgo. Though sequentially lower than April's record ₹2.09 trillion, gross GST collection in May stood at ₹2.01 trillion, up 16.4 per cent from a year ago.
Higher GST collections indicate stronger government revenue and economic growth, boosting PSU banks' loan demand and reducing credit risks. This could improve their profitability and asset quality.
A shot in the arm: Cooling inflation boosts sentiment
India's retail inflation eased to 3.16 per cent in April from 3.34 per cent in March, driven by a sharp fall in vegetable and pulses prices. This provides additional room for the RBI to support growth, especially after GDP data showed a robust 7.4 per cent expansion in the January–March quarter of FY25, ahead of the RBI's 7.2 per cent forecast.
According to Ravi Singh, SVP of retail research at Religare Broking, Nifty PSU Bank witnessed a gain of nearly 24 per cent since March 2025 taking cues from RBI's supportive policies to increase liquidity and fuelled optimism among major PSU banks and boost investor's confidence. Along with this, higher GST collections have further pushed this rally, offering a strong tailwind for the growth trajectory of public sector banks.
'These combined factors have not only improved the operational outlook for PSU banks but have also assisted them for sustained growth in the long-term,' Singh said.
That said, the combination of likely rate cuts, moderating inflation, robust economic growth, and buoyant tax revenues provided a shot in the arm for PSU bank stocks, which outperformed in anticipation of a growth-friendly policy outcome.