The Bank Nifty surged to a 10-day high. Know why

The Bank Nifty surged to a 10-day high after global brokerage CLSA came out with a partially positive report on PSU Banking stocks based on the analysis of 5 lenders' earnings from that space.

PSU banks have seen their asset quality deteriorate and bad loans rise sharply because of a slowdown in major sectors such as steel, cement, infrastructure as also agriculture. As a consequence, their share prices have been hammered too over the past 12 months.

Meanwhile, CLSA said it saw a slight glimmer of hope in the earnings of these 5 PSU banks, where there was moderation in the formation of new stress loans. The delinquency ratio too had moderated to 4 percent of past year's loans from 5 percent in the fourth quarter.

This assessment sparked a rally in PSU Banking shares. Bank of Baroda surged 5.9 percent to 188.35 rupees. IDBI jumped 4.1 percent to 68 rupees. Union Bank gained 3.5 percent to 183.30 rupees. State Bank of India rose 3.5 percent to 280.55 rupees and Punjab National Bank added 2.8 percent to 155.55 rupees on the National Stock Exchange.

The Bank Nifty, too, took flight. It traded at the highest level since July 22nd, adding 1 percent at 19,023 points.

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