Revival, Selloff Hopes Add Sheen To Bank Stocks

Second-line bank stocks have surged between 10 per cent and 37 per cent within a fortnight on the Bombay Stock Exchange (BSE) on hopes of a revival in the economy and divestment at a later date.

Even among these stocks it is PSU banks which have gained majorly. Dena Bank topped the list with a 37 per cent increase in its scrip price at Rs 11.85 from Rs 7.50 recorded on May 21. It was followed by Andhra Bank, which gained 29 per cent from Rs 10.25 on May 21 to Rs 14.45 today.

According to a dealer with a domestic brokerage, "The main reason for these PSU bank stocks to have gained in the last fortnight is that punters expect the BJP government to begin a disinvestment story in this sector as well."

One of the reasons also attributed by market analysts with regard to the bank stocks and second-line bank stocks is the fact the yields have been good. J&K Bank, Punjab National Bank, South Indian Bank, Andhra Bank, Global Trust Bank, Bank of Baroda, Bank of India, IOB, Oriental Bank of Commerce, Dhanalakshmi Bank, Bank of Punjab, IndusInd Bank, State Bank of Travancore, syndicate and Vijaya Bank are giving yields between 6 per cent and 13 per cent.

The other PSU bank stocks which have gained on the BSE are Indian Overseas Bank (IOB), up 21.8 per cent from Rs 342.50 to Rs 438.50 as of today. The fourth among these PSU bank stocks which has performed well is Syndicate Bank, which gained 21.1 per cent from Rs 10.25 as on May 21 to Rs 13 today. Vijaya Bank is up 17.7 per cent to Rs 11.80 as of today. Oriental Bank of Commerce, another commercial enterprise is up 7.75 per cent from Rs 39.85 to Rs 43.20.

As compared to frontline stocks such as HDFC Bank, ICICI Bank, State Bank of India and Corporation Bank have shown lower returns or negative growth. While HDFC Bank in the last fortnight has gained only 1 per cent from Rs 221.5 as on May 21 to Rs 223.55 as of today, Corporation Bank posted negative returns. The stock was down 9.8 per cent from Rs 124.25 as on May 21 to Rs 113.10 as of today.

"Despite the fact that frontline bank stocks have not performed too well, overall the stocks are being viewed as value picks following impressive results posted by most of them," analysts said.

They added, "Although there is pressure on margins and a slowdown in the economy, almost all commercial banks registered very good results. This in spite of the fact that the low credit offtake last year prompted a flat top line growth and despite falling interest rates top line would spurt as credit offtake is expected to improve for the entire banking sector. Efforts made by banks to cut costs and optimise treasury operations have yielded good results which have been reflected in inflated bottomlines."

Analysts say both private and public bank stocks are expected to witness a further surge in days to come as almost all stocks are trading at a low PE multiple.