Canara Bank shares up 19% this month: What's the reason?
What's the story
Canara Bank's shares have hit a new high, with a jump to ₹124.55 apiece today. The stock has gained nearly 19% this month alone, its best monthly performance since October 2022. Today's intraday high is the highest level the stock has reached since June 2024. The strong performance comes after three months of pressure on Canara Bank's share price.
Market performance
Year-to-date gains at 23%
The recent surge in Canara Bank's shares has also boosted its year-to-date gains to 23%. If this trend continues, it would be the fifth consecutive year of positive returns for the stock. The turnaround in sentiment is driven by several factors, including reports of a possible increase in foreign portfolio investor (FPI) limit for public sector banks, and expectations of increased credit demand.
Investment boost
Government considering raising FPI limit in PSU banks
Recent media reports have suggested that the Indian government is considering raising the foreign investment limit in public sector banks. The proposal seeks to raise the FPI cap from 20% to as high as 49%, while ensuring that government ownership remains above 51%. This move is expected to bring in significant capital into the banking sector, especially benefiting PSU banks included in global indices.
Financial impact
Potential passive inflows for Canara Bank
As per a note by Nuvama Alternative and Quantitative Research, six PSU banks, including Canara Bank, could see passive inflows of over $900 million if the foreign shareholding limit is raised. For Canara Bank alone, where foreign shareholding is currently at 11%, potential passive inflows could be around $64 million. This potential influx has made investors and analysts closely monitor the bank's performance.