“The open interest in Bank of Baroda futures by number of shares is at a lifetime high and in SBI it is at the highest since September 2020,” said Siddarth Bhamre, director-alternative investments and research at InCred Equities. “If SBI crosses the previous lifetime high, then it can see a substantial upside.” SBI shares, which rose 2.4% to close at Rs 411 on Monday, touched a lifetime high of ?427.70 on February 18 this year.
Nifty PSU Bank index gained 2% to close at 2,398.15 on Monday, with Punjab National Bank, Central Bank,
, Union Bank and SBI gaining 2-5%.
In the ongoing May series, SBI’s shares are up 14.6% while Bank of Baroda’s shares are up nearly 22%. Punjab National Bank’s shares are up 13.5% during the same period.
The renewed appetite in public sector bank shares is part of the recent shift in investor interest to beaten-down stocks.
PSU bank shares have mostly been underperformers vis-à-vis their private sector peers in the past decade because of high nonperforming loans (NPLs) and loss of market share. The superior performance by private sector banks pushed their valuations to record levels.
The Nifty PSU Bank index is down 11.6% in the past three years, while the Nifty Privare Bank Index is up 23%. The Nifty index is up 43.1% in the same period.
PSU banks including Bank of India, Punjab National Bank, Bank of Baroda and UCO Bank among others are trading at a Price to Book (P/B) of around 0.55-0.7 times. SBI is trading at P/B ratio of 1.6 times. In comparison, private lender HDFC Bank is trading at 4.1 times and
is at 5.5 times.
Suresh Ganapathy, head of financial services research at Macquarie India, said investors are taking a call that corporate asset quality cycle for PSU banks has decisively changed after several years of pain.
“…post-covid books are likely to be clean. All PSU banks have managed to raise money via QIPs… the fact that they are able to raise money is a positive factor,” said Ganapathy.
In the near-term, their share prices would be driven by Covid-related news, he added.
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