Stock of this PSU bank has nearly doubled in just nine trading sessions

Punjab & Sind Bank trading higher for the fourth straight day, surging 42 per cent during the period, and quoted at its highest level since February 2018.

Shares of Punjab & Sind Bank hit an over four-year high at Rs 40.75, as they rallied 10 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes. The stock of public sector undertaking (PSU) bank traded higher for the fourth straight day, surging 42 per cent during the period. In the past nine trading days, it has zoomed 96 per cent from Rs 20.80 on November 30.

In the past one month, the stock price of Punjab & Sind Bank has skyrocketed 125 per cent, as compared to 1 per cent rise in the S&P BSE Sensex. The stock traded at its highest level since February 2018. The counter has seen huge trading volumes with a combined 15 million shares changing hands on the NSE and BSE till 09:57 AM.

For July-September quarter (Q2FY23), Punjab & Sind Bank reported healthy earnings with net profit grew 27.5 per cent year-on-year (YoY) at Rs 278 crore against Rs 218 crore in Q2FY22. Net interest income grew 25.6 per cent YoY, while net interest margin (NIM) improved to 3.06 per cent for Q2FY23 from 2.60 per cent in Q2FY22. Gross non-performing assets (GNPA) ratio reduces by 487 bps on YoY basis to 9.67 per cent.

Meanwhile, in past three months, the stock has rallied 145 per cent, as compared to 3 per cent rise in the S&P BSE Sensex.

On September 29, Punjab & Sind Bank said the rating agency CARE reaffirmed the ratings of the Bonds issued by the bank and revised the outlook from "Negative" to "Stable".

The ratings assigned to the debt instruments of Punjab and Sind Bank factor in majority ownership, demonstrated and expected continued support from Government of India (GoI) being the majority shareholder holding 98.25 per cent share in the bank, improvement in capitalisation post equity infusion of Rs 5,500 crore during FY21 (refers to the period April 01 to March 31) and Rs 4,600 crore in FY22 by way of recapitalisation bonds, which have helped the bank to maintain its capitalisation ratios and would support business growth in the near term, CARE said in its rating rationale.

The ratings further factor in the bank’s established presence in north India as well as its strong liquidity profile. The change in the outlook to "Stable" is on account of improvement in profitability and asset quality parameters resulting in limited impact of credit costs on the profitability of the bank, the rating agency had said.

Furthermore, the bank’s earnings profile has been moderate as it has started reporting profits from FY22; however, any higher than-expected impact on account of COVID-19-related stress might impact the profitability.

The ratings continue to be constrained on account of relatively weaker asset quality parameters as compared to peer public sector banks and higher proportion of stressed assets; however, the bank has made significant amount of provisioning during the third quarter of FY21, which has improved the provision coverage ratio (PCR) on gross non-performing assets (GNPA) for the bank, CARE said.

Technical View

Bias: Positive

Target: Rs 42.50 - Rs 44

Support: Rs 37.90

Thanks to the fierce rally, the stock is seen trading with an extremely bullish bias on the daily, weekly and monthly charts, albeit now in the overbought territory.

The near-term bias is likely to remain bullish as long as the stock sustains above Rs 37.90, i.e. the higher end of the Bollinger Bands on the daily chart. On the upside, the stock may extend its rally to Rs 42.50 - Rs 44 levels, indicates the monthly Fibonacci chart.

However, in case, the stock slips below Rs 37.90, it may witness a corrective move to near about Rs 33-level on the downside.

The 14-day RSI is in extremely overbought condition near 92-odd level, but yet to show some negative divergence.

(With inputs from Rex Cano)