Missed? Chance to catch another PSU bank bus beckons
Investors who missed it earlier now have the opportunity to board the PSU bank bus offering attractive entry points to long term investors.
Index returns by 12-stock Nifty PSU Bank is to the tune of 32% over a 1-year period which is higher than 11.36% returns delivered by Nifty Bank and 19.57% by broader Nifty50.
Individually, Punjab National Bank (PNB), Central Bank of India and Union Bank of India have given returns of 66%, 62% and 51%. Other including Bank of Maharashtra, Indian Bank, Canara Bank, Indian Overseas Bank (IOB), UCO Bank Bank of India, Bank of Baroda (BoB) and State Bank of India (SBI) have given income of 49% and 4.27% during this period with index heavyweight SBI featuring as the biggest laggard.
PSU banks remain beneficiaries of a benign macro with valuations offering comfort, JM Financial said while picking SBI and BoB as its top bet.
«PSU banks have seen meaningful improvement in valuations (30%/22% premium to 5/10 year average) given that RoAs have normalised. While incremental valuation upsides are contingent to RoA upticks for PSU banks, a benign macro should aid stock performance,» JM Financial said.
Also, pivot to retail/SME by is driving a granular asset mix thus reducing concerns on asset quality to a large extent.
This, in addition to inexpensive valuations (in the context of delivered RoEs), have resulted in strong outperformance by this pocket.
«In the last six months, PSU banks have been a star on the Street and performing better than the private sector banks. These last two years, especially the last six to seven quarters, have been PSU banks.
