1 week ago
PSU Bank Stocks Rally as Results, Valuations Lift Sector
Shares of government-owned banks rose on Wednesday, 26 August.
The main index for these banks gained nearly 2% in morning trading.
Several banks, including State Bank of India and Punjab National Bank, rose by as much as 6%.
Their recent quarterly results were better than investors expected in important areas.
Many banks also reported fewer new bad loans than a year earlier.
Investors believe public-sector banks may face less pressure on their profit margins than some private banks.
These shares are also cheaper compared with the value of the banks’ assets.
Strong lending and deposit growth, along with investors moving money between sectors, added to the buying interest.
The Nifty PSU Bank index rose 1.8% in morning trade on 26 August.
Bank of Maharashtra, Bank of India, Canara Bank, Punjab National Bank and State Bank of India gained between 1% and 6%.
The PSU banking index has risen 4% this month, outperforming the Nifty Private Bank’s 0.60% gain and the broadly flat Nifty 50.
Healthy Q1FY27 results and lower year-on-year slippages supported the rally despite currency weakness and higher crude oil prices.
Analysts cited stronger margins, discounted valuations, healthy credit and deposit growth, and sector rotation as additional drivers.
- Who
- Public-sector banks, including State Bank of India, Punjab National Bank, Bank of Maharashtra, Bank of India and Canara Bank, along with investors and analyst Harshal Dasani.
- What
- PSU bank stocks rallied, lifting the Nifty PSU Bank index by 1.8% in morning trade.
- Where
- The Indian stock market.
- When
- Wednesday, 26 August; the index had gained 4% month to date.
- Why
- Healthy Q1FY27 results, lower slippages, relatively favorable margin conditions, discounted valuations, strong credit and deposit growth, and sector rotation supported the rally.
Key facts
- Nifty PSU Bank move
- The index rose 1.8% in morning trade on 26 August.
- Monthly performance
- The Nifty PSU Bank index gained 4% during the month so far.
- Private-bank comparison
- The Nifty Private Bank index rose 0.60% during the same period.
- Individual stock gains
- Bank of Maharashtra, Bank of India, Canara Bank, Punjab National Bank and State Bank of India gained between 1% and 6%.
- Results factor
- Healthy Q1FY27 results and lower year-on-year slippages supported sentiment.
- Valuations
- PSU banks continue to trade at meaningful discounts to book value, according to Harshal Dasani.
- Credit growth
- Canara Bank’s advances were up nearly 18% year on year in an early business update.
Quotes
Harshal Dasani
Business Head at INVAsset PMS who commented on the reasons for PSU bank outperformance
“The 4% versus 0.60% divergence this month is a rotation with real reasoning behind it, not a speculative flare”
livemint.com
Sources
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