Share prices of select PSU banks such as Central Bank of India, Indian Overseas Bank, Bank of Maharashtra, and Bank of India all hit respective upper circuits during Thursday’s trading session. The sharp uptick in these state-owned banks comes days after news agency Reuters reported that these could be part of government’s privatisation drive next fiscal year. Earlier, in the Union Budget, Finance Minister Nirmala Sitharman had announced that the government will privatise four banks and an insurance company.
Central Bank Of India’s share price was at Rs 24.04 per share on Thursday, while Indian Overseas Bank stock price was at Rs 19 apiece, both at 20% upper circuits. Shares of Bank of India hit 10% upper circuit along with Bank of Maharashtra. However, the government has still not officially announced the names of the banks it plans to privatise.
Right to time buy PSU Bank?
“I don’t see any fundamental reason to go for PSU Banks right now,” Binod Modi, Strategy Head, Reliance Securities told Financial Express Online. Currently, only the privatisation news is fuelling the prices of these state-owned banks, he adde. “It is difficult to get a fair idea on PSU banks owing to the situation their balance sheets are in right now. Even RBI is cautious while talking of PSU banks, raising asset quality issues,” he added.
Earlier this month, global rating agency Moody’s said that NPA risks might be easing for PSU Banks but those will continue to remain stressed due to shortage of capital while profitability remains missing. The Government has decided to recapitalise banks, but, that is expected to just help them meet Basel capital requirements and not boost credit growth.
Among lenders, Binod Modi prefers large private sector banks. “Private banks look to be better. The way they have performed, be it on provisions or their asset quality, it gives an edge to private sector banks,” he said. In a recent report, Morgan Stanley had said that large private banks have emerged stronger post-crisis with stronger balance sheets, and growth/market share accelerating.
(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)