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  1. Best performing PSU bank share in 2017; buy now and gain 30% more in New Year 2018

Best performing PSU bank share in 2017; buy now and gain 30% more in New Year 2018

This year India’s stock markets have emerged as one of the top performers with stocks of real estate, metal and mining, media and bank leading the charge. We bring to you the best performing PSU bank stock of 2017 to buy and you may gain over 30% in New Year 2018.

By: | Published: December 28, 2017 12:50 PM
The benchmark Nifty PSU Bank index had surged about 26% in the last one year period. (Image: Wikimedia Commons)

This year India’s stock markets have emerged as one of the top performers among the major economies of the world with stocks of real estate, metal and mining, media and bank leading the charge. The key equity indices Sensex and Nifty have grown about 30% in 2017. There are many stocks which have beaten Sensex and Nifty, and also the sectoral indices. Until late October 2017, the private bank shares were leading the rally in banking space but since the time Narendra Modi government announced Rs 2.11 lakh crore mega recapitalisation of PSU banks, PSU bank stocks have regained momentum. The benchmark Nifty PSU Bank index had surged about 26% in the last one year period. We bring to you a PSU bank stock which has surged 85% in 2017 to buy and you may gain over 30% in New Year 2018.

Shares of Indian Bank have emerged as the top performers among the PSU bank stocks, rising as much as 80%. Indian Bank shares have outperformed Nifty Bank and Nifty PSU Bank index respectively. The stock of Indian Bank zoomed 80% to Rs 385.6 from a level of Rs 213 a year earlier. The research and brokerage firm IIFL has given a buy rating with a target price of Rs 505 which implies an upside of 31% from its current market price of Rs 385.6. Indian Bank is a group ‘A’ stock and is included in the S&P BSE 500 index. Indian Bank shares have an ISIN (International Security Identification Number): INE562A01011 and a scrip code: 532814.

The Chennai-headquartered state-owned lender Indian Bank incorporated in 1907 is a mid-sized PSU bank with one of the best return ratios among PSBs (Public Sector Banks). “We forecast its total loan book to expand by 15.4% over FY17-19E. The bank’s strong capital adequacy ratio at 13.6%, with Tier-1 capital at 12.2% (FY17) coupled with branch expansion initiatives, will boost the loan book for next couple of years. We believe GNPA would decline further by 225 bps to 5.2% over FY17-19E. The bank’s NIM is likely to improve by 41 bps to 3% over FY17-19E due to its focus on retail loans and moderation in slippages. Further, the CASA ratio would surge 248 bps to 39% over FY17-19E led by a focus on recomposition of loan book. The RoA and RoE of the bank for FY19E is projected at 1% and 13.1% respectively. Despite higher return ratios, Indian Bank is trading at 0.93x FY19E P/ABV valuations. We recommend BUY on the stock with a target price of Rs 505 (1.4x FY19E ABVPS),” according to IIFL.

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