SBI expands list of equity for investments beyond Nifty

SBI's total investments were pegged at Rs 485,734 cr at end-September. This is predominantly of government and corporate bonds, with a very small share of equity investments

As a step to make gains from a rising stock market, State Bank of India has expanded its list of equities for investments to go beyond the National Stock Exchange's Nifty 50 index scrips.

A senior executive at SBI, the country's largest lender, said with the change of guard at the central government, the economic outlook was looking up and market sentiment reflected it. This had already improved the value of SBI's equity investments. The NSE's 50-stock benchmark index has appreciated by 26 per cent from end-March, to around 8,400 till now.

While making investments, the approach will be selective, with the option to choose from a wider universe. A wider choice also provides room to avoid concentration in only 50 stocks in a rising market, the executive said. He, however, declined to name the identified scrips, saying investment ideas are not cast in stone and it was a dynamic situation.

SBI's total investments were pegged at Rs 485,734 crore at end-September. This is predominantly of government and corporate bonds, with a very small share of equity investments. This value could be about Rs 4,000 crore. Direct exposure is capped at 20 per cent of the bank's net worth.

There are also stringent internal rules for trading in permitted equities. On the down, that is when the market\stock is falling, stopping of losses is cardinal. And, on the high, it would not be strategy to stay on only because a stock is appreciating continuously. There could be profit booking on, say, 20 per cent appreciation, the executive said.

The approach is certainly not to find a "value stock" and stay invested for years, nor that the activity is driven by a mentality of trading on thin margins.

Being the largest bank, it says it has to be aware about the exposure level to a particular company, as many of these are its borrowers.

Some of the equity investment has come into the treasury book through a restructured package, where part of the loans are converted into equity, as in the case of Kingfisher Airlines. While taking a call on such equity exposure, the treasury has to be aware of the strategic implications, since some rights like board positions and participation in key decisions are associated with these, the executive added.