Bank Nifty - Can Bank on it!
By Geetanjali Kedia
We have been giving bullish view on Bank Nifty from start of this week, when all the experts and media have been giving a bearish call and questioning its sustainability, as leader amongst the indices, in view of bad quarterly results posted by the PSU banks, coupled with huge profit booking seen in the private sector banking stocks, since start of Feb F&O series (on 30th Jan). Since then, we have got lot of requests to carry a detailed write up, reasoning our bullish view on Bank Nifty. In response thereto, we are giving few pointers to support our bullish view:
- We feel that the pre-budget rally has set in and Bank Nifty will take the lead to make it move forward in February series, as also for the first day of March series, ahead of Budget (i.e. 27th Feb).
- Results of all the PSU banks are out, except Bank of Maharashtra (BoM) and SBI. While BoM result is likely to be dull, it won't have much relevance and impact. We feel SBI may not disappoint. Incidentally, both the results are scheduled tomorrow viz., 13-02-2015, which will also put an end to the concerns on these PSU numbers from tomorrow, after 3 pm.
- We have seen Bank Nifty moving to 21,130 on 28-01-2015, in Jan F&O series, with low seen at 18,295 on 10-02-2015, in Feb series. So, correction of over 2,800 points, or over 13% was seen in the last couple of weeks, which was much more than warranted. Closing today, on 12-02-2015 is at 19,256. A rise of 1,000 points was seen in last couple of days, which went unnoticed by the market experts.
- This has happened with long positions been created in last couple of days, with only part short covering seen. Once, it moves up further by 300-400 points, in the near term, massive short covering will be seen, as break above 19,500 will be viewed by experts as a technical break out. Also, if market has to move up, bank stocks cannot be left behind, as weightage of Bank Nifty has risen over 30% in the index, at its peak levels.
- With PSU results coming to an end from tomorrow, short covering and renewed buying will also start coming in, into these stocks. Some of the PSUs like Canara Bank, BoB, BoI, Syndicate Bank, Union Bank, Vijaya Bank having net NPA of less than 3%, as at 31-12-14 can't be termed as alarming or bad, more especially after loan has to be finally restructured by 31-3-15, as per RBI directives to banks. It is also essential to see Book Value and EPS of these PSUs, as it has fallen to PBV of less than 0.7 times, while EPS of many banks are seen quite decent, even after making higher provisions for non performing loans.
- A table giving financials and Q3 results of all 24 PSU banks are given hereunder.
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| PAT (Rs cr) | Net NPA (%) | EPS (Rs) | Net Worth (Rs cr) | BVPS (Rs) | |||||
| Sr No. | PSU Bank | Q3FY15 | Q2FY15 | Q1FY15 | 31-12-14 | Q3FY15 | Q2FY15 | Q1FY15 | FY14 | 31-12-14 | 31-12-14 |
| 1 | Allahabad Bank | 164 | 141 | 113 | 3.89% | 3.01 | 2.60 | 2.07 | 22.89 | 12,229 | 225 |
| 2 | Andhra Bank | 202 | 144 | 107 | 3.70% | 3.42 | 2.45 | 1.81 | 7.67 | 9,191 | 156 |
| 3 | BOB | 334 | 1,104 | 1,361 | 2.11% | 7.78 | 25.71 | 31.71 | 107.38 | 38,969 | 181 |
| 4 | BOI | 173 | 786 | 806 | 2.70% | 2.70 | 12.24 | 8.68 | 42.45 | 31,564 | 491 |
| 5 | BoM^ | 163 | 118 | 1.57 | 1.40 | 4.56 | 8,024 | 75 | |||
| 6 | Canara Bank | 655 | 627 | 807 | 2.42% | 14.22 | 13.59 | 17.49 | 54.48 | 31,412 | 681 |
| 7 | Central Bank | 138 | 103 | 192 | 3.58% | 0.66 | 0.43 | 1.11 | -11.10 | 15,173 | 107 |
| 8 | Corp Bank | 147 | 161 | 231 | 3.27% | 8.79 | 9.58 | 13.82 | 33.53 | 10,593 | 126 |
| 9 | Dena Bank | 77 | 52 | 82 | 3.97% | 1.42 | 0.96 | 1.52 | 14.40 | 7,352 | 137 |
| 10 | I O B | -516 | -245 | 272 | 5.52% | -4.18 | -1.99 | 2.20 | 6.05 | 15,627 | 127 |
| 11 | IDBI Bank | 102 | 118 | 106 | 3.05% | 0.64 | 0.74 | 0.66 | 8.00 | 23,937 | 149 |
| 12 | Indian Bank | 278 | 314 | 207 | 2.74% | 5.97 | 6.76 | 4.46 | 26.07 | 14,641 | 315 |
| 13 | Oriental | 20 | 291 | 365 | 3.68% | 0.65 | 9.72 | 12.16 | 38.73 | 13,432 | 448 |
| 14 | Pun & Sind | 58 | 112 | 21 | 3.81% | 1.45 | 4.06 | 0.78 | 10.90 | 5,202 | 130 |
| 15 | PNB | 774 | 575 | 1,405 | 3.82% | 4.28 | 15.89 | 38.81 | 93.91 | 38,637 | 213 |
| 16 | S B T | 74 | 19 | 50 | 3.06% | 12.55 | 3.24 | 8.44 | 60.87 | 5,103 | 865 |
| 17 | SBBJ | 163 | 118 | 214 | 2.64% | 23.34 | 16.95 | 30.66 | 104.53 | 5,852 | 836 |
| 18 | SBI^ | 4,023 | 4,448 | 53.90 | 44.86 | 156.76 | 1,56,509 | 210 | |||
| 19 | SBM | 96 | 102 | 75 | 3.11% | 20.03 | 21.22 | 15.57 | 57.39 | 4,817 | 1,003 |
| 20 | Syn Bank | 305 | 316 | 485 | 2.38% | 4.88 | 5.05 | 7.77 | 28.21 | 12,620 | 202 |
| 21 | UCO Bank | 308 | 104 | 521 | 4.25% | 2.99 | 1.02 | 5.14 | 19.44 | 12,193 | 120 |
| 22 | Union Bank | 302 | 371 | 664 | 2.95% | 4.76 | 5.88 | 10.54 | 27.99 | 19,798 | 311 |
| 23 | United Bank | 42 | 43 | 66 | 8.50% | 0.43 | 0.43 | 0.82 | -28.68 | 5,202 | 73 |
| 24 | Vijaya Bank | 37 | 144 | 161 | 1.89% | 0.44 | 1.67 | 1.86 | 7.64 | 6,224 | 72 |
^ Networth and BVPS as of 30-09-14, as BoM and SBI to announce Q3 results on Fri, 13th Feb.
- Renewed buying is also seen having resumed in Axis, ICICI, Yes, Indusind, which were instrumental in making Bank Nifty to move up by about 1,000 points in last couple of days, as also were drivers for Bank Nifty to record life time high in Jan F&O series.
- Even other private sector banks with no identified promoters viz., South Indian Bank, Karnataka, Federal, City Union, Lakshmi Vilas, Karur Vysya, Dhanlaxmi are looking attractive buys now, as they also seem to have bottomed out.
- It is also a certainty that rate cut from RBI will be seen after budget, maybe in the first week of March itself, which will be seen a big booster, mainly for PSU banks. Today’s CPI of 5.11% for January instills confidence.
In the given circumstances it is advised to keep bullish view on Bank Nifty for residual tenure of February series. One can enter Bank Nifty after seeing budget reaction as well, as a cautious trader.