BoB, Dena Bank, Vijaya Bank merger: Investors lose Rs 2.72 lakh crore in 2 days
Mumbai, Sep 19: The government decision to merge three state-run banks came as a surprise for the three lenders but not for the investors tracking the banking sector.
Stock investors became poorer by Rs 2.72 lakh crore in two days of market fall which saw the BSE benchmark index diving almost 800 points.
Market benchmark BSE Sensex on Tuesday tumbled by about 295 points or 0.78 per cent to close at 37,290.67 due to increasing crude oil prices and mounting trade tension. It had lost 505.13 points or 1.33 per cent on Monday as rupee woes and trade war worries spooked investors.
Overall, the 22 banks listed on Indian stock exchanges lost about 203 billion rupees ($2.8 billion) of market value, according to the reports.
On Tuesday, shares of Bank of Baroda (BoB) plunged 13 per cent but those of Dena Bank and Vijaya Bank jumped 20 per cent and 6 per cent, respectively.
With banking shares falling, hedging prices have also dropped. Protecting the lenders' gauge against further volatility has become the cheapest since January relative to the broader Nifty, data compiled by Bloomberg show.
Led by the sharp fall in stocks, the market capitalisation (m-cap) of BSE-listed companies plunged Rs 2,72,549.15 crore to Rs 1,53,64,470 crore since Friday. "Selling pressure increased on the bourses due to spike in oil prices," said Vinod Nair, Head of Research, Geojit Financial Services Ltd.
Flaring up of trade tariff tensions between the US and China and weakness in the rupee have also added to weak investor sentiment. From the 30-share basket, 24 stocks ended with losses led by SBI, Tata Motors, Bajaj Auto and Axis Bank.
Government announced the merger of three public sector banks-Bank of Baroda, Dena Bank, and Vijaya Bank, in a move aimed at reducing the bad loan mess in PSB's, multiple news outlets reported.
The merged entity, comprising two relatively stronger banks and a weak one, will be the third-largest lender in India after State Bank of India and HDFC Bank Ltd, with a total business of more than ₹14.82 trillion.
The first major banking sector consolidation during the tenure of the NDA government was the merger of five associate banks of State Bank of India with itself. The government has also moved on Life Insurance Corporation of India's proposal to acquire majority stake in IDBI Bank.