Public Sector Banks have MORE resistance

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Pradip Kumar Dey: Mar 04 2009, 02:38 IST

Despite better profit performance, banks have been unable to increase investor confidence during the last one year. Private sector banks lost a significant amount of investors' wealth (Rs 1.58 lakh crore) during February 13, 2008 and February 13, 2009. In market capitalisation, private banks showed a higher decline compared to public sector banks (PSBs) during the above period. A comparison between 21 PSBs and 17 private sector banks illustrates that PSBs showed a lesser decline in market capitalisation during the last one year.

Harish Menon, executive director, H-Zone Capital said, “Despite an above average increase in profitability, banking stocks have fallen in line with the broader markets due to a large scale financial meltdown in global markets. Increasingly, concerns about the asset quality of many banks and their overseas exposure have also resulted in investors going under-weight on the sector. Having said that, current valuations of many frontline PSBs are looking attractive.”

In the case of public sector banks, market capitalisation at the aggregate level decreased by 42.4% to Rs 1.61 lakh crore on February 13, 2009 from the level of Rs 2.80 lakh crore on February 13, 2008, and in the case of private sector banks, market capital decreased by 55.1% to Rs 1.27 lakh crore from Rs 2.82 lakh crore during the above period. And the decline was higher in private banks compared to PSBs during the study period.

The Bankex also decreased by 50.5% (5,118.15 points) to 5,024.92 on February 13, 2009 from the level of 10,143.07 on February

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