Goldman Sachs, CLSA cheer PSU bank recapitalisation; hike Nifty target

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Published: October 27, 2017 1:56:36 PM

Goldman Sachs and CLSA have hailed the the Narendra Modi-led government’s announcement of a mega plan of Rs 2.11 lakh crore to recapitalise the stressed public sector banks.

Nifty, market, market story, market news, market updates, Sensex, BSE, BSE IPO indexGoldman Sachs has hiked the Nifty target to 11,600 in December 2018 vs the earlier target of 10,900 points. (Image: Reuters)

Goldman Sachs and CLSA have hailed the the Narendra Modi-led government’s announcement of a mega plan of Rs 2.11 lakh crore to recapitalise the stressed public sector banks. According to CLSA, the sharp rally in PSU bank stocks is not surprising. Yesterday, Shares of State Bank of India and Punjab National Bank hit a fresh record high, rising as much as 7.79% to Rs 351.3 and 14.55% to Rs 231.45 respectively. Shares of India’s largest bank by asset size and loan book State Bank of India hit a 52-week high zoomed nearly 30% in the intraday trade on Wednesday. SBI has surpassed four companies — Hindustan Unilever, HDFC Bank, Maruti Suzuki and ONGC to become the fifth largest company by market capitalisation.

“Most of the fund managers were massively underweight and now they are going for value from growth.The government’s plan addresses a lot of banking sector issues in a proactive manner,” ET Now reported CLSA as saying. CLSA has maintained its position as overweight India, while taking some positions out of Korea. “CLSA’s weight in relative return portfolio has increased by 2%,” ET Now reported.

Track live stock prices: State Bank of IndiaPunjab National Bank;  Maruti Suzuki;  Hindustan UnileverONGC 

“The failure to address the banking sector issue more proactively has been the one major piece of unfinished business in the Modi administration. The vacuum should now be filled, which means it is now realistic to look forward to a new credit and investment cycle,”  Christopher Wood, Managing Director and Equity Strategist at CLSA said in a note to investors. Nirlmal Jain of IIFL too shared a similar view.  

In an interview to ET Now, Nirmal Jain, Chairman of IIFL said, “If you look at the government’s track record, this was the only big piece of reform which was pending. I think the entire money which was needed for revival has been provided.” Meanwhile, Goldman Sachs has hiked the Nifty target to 11,600 in December 2018 vs the earlier target of 10,900 points. Further, the global financial services firm has gone overweight on PSU banks and gone underweight on Indian NBFCs.

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