PSU bank stocks rally up to 4% on disinvestment buzz; gains pare in afternoon trade

Shares of public sector banks (PSU) surged up to 4% on Tuesday after reports suggested that the government is fast-tracking its stake sale in select lenders. The rally was driven by investor optimism surrounding the proposed disinvestment of up to 20% in five PSU banks through Qualified Institutional Placement (QIP) and Offer for Sale (OFS) routes over the next six months.

However, the early gains began to taper off by the afternoon.

Indian Overseas Bank rose nearly 4% to an intraday high of ₹38.98 before slipping to ₹37.93 around 12:13 PM, up just 1.17% from the previous close of ₹37.49. Punjab & Sind Bank also gave up part of its gains, trading at ₹31.38 after hitting a high of ₹32.34 earlier in the session—up 3.45% from its previous close of ₹31.26.

According to a CNBC Awaaz report, the government is in the final stages of appointing merchant bankers for the proposed stake sale in Indian Overseas Bank, Central Bank of India, UCO Bank, Bank of Maharashtra, and Punjab & Sind Bank. The move is aimed at helping these lenders meet the SEBI-mandated 25% minimum public shareholding norm by August 2026, while also strengthening their capital and operational capabilities.

Central Bank of India also gained 2.87% to an intraday high of ₹39.06 from its previous close of ₹37.97, while UCO Bank climbed 2.7% to ₹32.14, and Bank of Maharashtra advanced 2.89% to ₹56.19.

The buying interest lifted the Nifty PSU Bank Index by over 1%, hitting an intraday high of 7,026.35. Barring five stocks including Canara Bank and Union Bank, all the remaining seven constituents of the index traded in the green. Meanwhile, the broader markets were under pressure, with the Sensex and Nifty 50 each down 0.3%, reflecting overall market caution despite the PSU bank rally.