Shares of public sector banks (PSBs) outperformed on Wednesday trade despite a weak show in Indian equity benchmarks. The state-owned lenders continued their forward march today riding on the back of strong second-quarter (Q2) results in the ongoing financial year 2022-23 (FY23).
Sub-index Nifty PSU Bank surged around 27 per cent in the past one month. Market experts termed the upward move as "a rub-off effect" in PSU bank stocks due to "stellar Q2 FY23 results."
The Central Bank of India stock touched an intraday high -- which is also its 52-week high -- of Rs 24.50, up 8.16 per cent from the previous close of Rs 22.65. It finally settled 6.18 per cent higher at Rs 24.05 today. A total of 56.18 lakh shares changed hands amounting to a turnover of Rs 13.25 crore.
On the other hand, shares of Indian Overseas Bank jumped 4.73 per cent to hit an intraday high of Rs 22.15 against its previous close of Rs 21.15. It finally closed 3.31 per cent higher at Rs 21.85.
Considering intraday low value, the stock traded more than 45 per cent higher from its June low of Rs 15.25, and around 7 per cent lower from its 52-week high of Rs 23.80, hit in November last year.
Here's what experts opined about the two state-owned lenders:
Jitendra Upadhyay, Sr. Equity Research Analyst, Bonanza Portfolio Ltd, said, "Central bank of India has reported loan growth of 12 per cent (YoY) on the back of solid retail loan book. Going forward, NIM (Net interest margin) will improve due to the bank's focus on floating-rate loans. During Q2 FY23, asset quality improved to 9.67 per cent as against 15.52 per cent in Q2 FY22 on a YoY basis. Asset quality trends are better than expected due to high recoveries and upgradation kept credit costs under control. We expect ROE (Return on equity) to improve going forward with the stock trading at a low valuation at 0.7x prices to book."
Sharing his views on Indian Overseas Bank, Upadhyay said, "IOB has reported loan growth of 18 per cent (YoY) on back of the strong upswing in the home loan book. As management is focused on growing retail deposits, we have seen the costs of deposits have declined in Q1 FY23 from 4.12 per cent to 4.04 per cent. Going forward NIM will improve and assets quality trends are better than expected. We expect ROE to improve going forward with the stock trading at a low valuation at 1.8x prices to book."
Of the two stocks, Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking Ltd, prefers IOB to Central Bank of India. "A comparative analysis against both the banking stock reveals that IOB might be better placed. IOB in comparison to Central Bank has retraced exceptionally higher. Now IOB is on the verge of breaking past the downward sloping trendline -- since 2010 -- at Rs 22.50-23. Patterns that emerge over a longer period of time generally are more reliable. Hence, a larger move can be expected once the price breaks out of the 12-year-old trendline i.e. above 23 levels," he said.
Das also said, "Volume accumulation in IOB for the past few days have witnessed a sudden spike, surpassing the 50-day average and thus citing increased participation along with indicating that prices to rally further with vigour. On the oscillators' front, 14-day RSI is trending up above its 9-period average supporting a bullish stance. Hence, one can accumulate the stock -- at the current level -- with an upside target of Rs 29-30 in a medium-term perspective."
Pavitraa Shetty from Tips2trades, said, "Out of the PSU banks, Indian Overseas Bank is very overbought. Investors should book profits at current levels or keep a strict stop loss of Rs 21. Central Bank of India also is overbought on the charts and investors can book profits at current levels or keep a strict stop loss of Rs 23 and exit near Rs 25.5."
"Stellar Q2FY23 results of a majority of the PSU banks have been one of the major reasons that Nifty Bank has remained at elevated levels," she added.
AK Prabhakar, Head of Capital, IDBI Capital, also echoed similar views. He said, "Quarterly results of public sector banks have been amazing. The net interest margins and NPAs have improved significantly. This will have a rub-off effect on other PSBs and financial stocks as well."
Meanwhile, the PSU bank sub-index surged 3.93 per cent today and topped the 15-sector gauges chart compiled by the National Stock Exchange (NSE).
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