Shares of
() were the top gainers in today’s trade as the stock surged 13% to Rs 29.75 apiece. Meanwhile, shares of , and rose over 8%. , , , and Central Bank of India advanced over 5% each.
2022 has been the best year in five for the PSU bank stocks.
In 2022, while there were broad-based gains in the banking pack, it was public sector banks that stole the show. State-owned banks gave their best-ever gains in at least a decade. The Nifty PSU Bank index has risen nearly 63% in 2022, the highest ever in a decade.
Should you keep buying?
Money managers do expect the banking pack to remain on the top of the betting list in 2023 as a recovery in the domestic economy will see the sector leading earnings growth for India Inc.
“This might not be the end of the rally for all PSU bank stocks. A few stocks with reasonable positives can be added on further dips. Investors should look at stocks which have sound asset quality and have further scope for growth,” Mohit Nigam, Fund Manager and Head – PMS, Hem Securities said.
In Q2, most PSU banks reported stellar earnings coupled with improvements in asset quality and rising credit growth numbers. Besides, state-owned banks also reported healthy NIMs, which analysts believe might be sustainable for another quarter as rising deposit rate hikes may be passed with a lag.
“PSU banks were up 74% in the last six months. Post the phase of significantly higher GNPA, treasury MTM losses, lower capital & sub-par growth, there has been a turnaround with comfort on asset quality; reversal of treasury losses, credit growth pick-up and just adequate capital position for most of them,” domestic brokerage firm ICICI Direct said.
“With a recovery in growth and stable asset quality, PSU banks are set for a further re-rating. Large PSU banks (
, BoB, ) are trading at ~0.8-1x P/BV, which paves the way for a further re-rating as peak valuations remain at ~1.2-1.5x in FY12-14. We remain positive on PSU banks, with upsides expected to continue in the medium term horizon,” it said.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
