Shares of Bank of Baroda tumbled 16 per cent, while Dena Bank surged up to 20 per cent Tuesday following merger announcement.
The scrip of Bank of Baroda dived 16.03 per cent to end at Rs 113.45 on BSE. Shares of Vijaya Bank plunged 5.69 per cent to close at Rs 56.40.
Bank of Baroda's market valuation fell by Rs 5,726.62 crore to Rs 30,013.38 crore on BSE. Vijaya Bank lost Rs 442.61 crore to Rs 7,355.39 crore in market capitalisation.
On the other hand, shares of Dena Bank jumped 19.75 per cent to end at Rs 19.10 -- its highest trading permissible limit for the day.
"The proposed merger between the three banks– Bank of Baroda, Vijaya Bank and Dena Bank is a step in the right direction to sustain the competitiveness of the public sector banks.
"Given the increasing size and growing market share of the Indian private sector banks, such a merger and the consequent economies and synergies will strengthen the competitiveness of PSBs as a whole," said Suman Chowdhury, President - Ratings, Acuite Ratings & Research Limited.
The government Monday said state-owned Bank of Baroda, Vijaya Bank and Dena Bank will be merged to create the country's third largest lender as part of efforts to revive credit and economic growth.
The move follows top lender State Bank of India last year merging with itself five of its subsidiary banks and taking over Bharatiya Mahila Bank, catapulting it to be among top 50 global lenders.
Post this merger, the number of PSU banks will come down to 19.