The share price of State Bank of India (SBI) surged to rocket’s height as the government announced its recapitalization policy. The price grew about 26.92% closing at Rs. 322.95.
Very positive for the Bank as well as the Share Holders:
No one actually imagined that the government would be offering recapitalization to the banks and that was the reason why the prices were quite low before the announcement. As the announcement happened, there was a huge surge in the share price of SBI. Before the announcement, the share price of SBI was Rs 246, the morning of October 24. The sudden rise pushed the rates to Rs 322.95, as of October 25th. SBI, India’s largest bank with asset size and loan book had a lean patch from August, 2017.
The highest price recorded in the last few months was Rs 312 on July 31st, 2017. Since then the prices have gone down day by day. The lowest hit was Rs 242.20 on October 19, 2017, the day of Diwali.
Few days ago, SBI was suggested as a good buy for medium term. You may expect further gains today as overall banking index is set to gain more in coming days..
Will this Recapitalization move work in favor of SBI?
There is no definite answer to this question. The chairman of SBI, Rajnish Kumar said that he is very happy with the government’s decision and such a step was the necessity of the hour. SBI’s gross NPA for the fourth quarter of FY17 stood at 112, 343 crores that was higher than the NPA of FY 16 which stood at 98, 173 crores. It is likely that with this step the gross NPA will come a bit down. The new chairman of SBI has also stated that they are in the making of a three year plan that will tackle the NPA issue. The former chairman, Arundhati Bhattacharya expressed regret that she couldn’t do much about the NPAs.
The step taken by the government is half done. There is much more to be done to solve this crisis. For a small while, one can experience the rise in share prices and it will remain steady for a while. For those who invested before recapitalization, they were the ones who gained the most due to price rise and if the price still sores high, they will be the ones living in gold!