Banking PSU stocks were revelling on rumours that the government may raise their FII limits, a proposal that was absent in the Union Budget for 2003-04 much to their dismay.

As a result of the re-emergent rumours, major banking PSUs moved higher including State Bank of India (up 1.03% to Rs 279.80), Union Bank (up 8.44% to Rs 24.40), PNB (up 5.10% to Rs 93.80), Andhra Bank (up 3.14% to Rs 26.25), Bank of India (up 2.82% to Rs 32.80), Allahabad Bank (up 2.65% to Rs 13.55), Canara Bank (up 2.05% to Rs 62.30) and Oriental Bank of Commerce (up 2.04% to Rs 57.65).

The accumulation has manifested on growing expectations that the FII limit in these banks will be hiked by the government soon. In fact, on Tuesday, media reports surfaced that the finance ministry is considering the proposal to hike the cap on foreign institutional investors' holding in SBI. This set off buying not only in SBI but in public sector banks in general. Public sector banks are pleading the case of raising FII limit to 49% from 20%. Reports quoted the minister of state for finance Anandrao Adsul as stating that the ministry is considering the proposal for increasing the FII cap in SBI and an announcement would be made in a couple of months. Earlier, there was disappointment for bank PSU stocks after the Union Budget failed to bring about the hike in FII cap from 20% to 49% as expected.

In the seven sessions between 28 February and 11 March 2003, the banking PSU sector, comprising 17 banks lost 7.07% or Rs 24,225.1 crore (Rs 242.25 billion) in market capitalisation to Rs 31,810.92 crore (Rs 318.1 billion) from Rs 34,233.43 crore (Rs 342.33 billion).