Govt banking stocks crash 30-50%; Are markets finally doing a reality check?

Business

oi-Sunil

By Sunil Fernandes

Published: Friday, October 3, 2014, 9:14 [IST]

Select banking, infrastructure and metal stocks which were the darling of investors, prior and just after the general elections are finding no takers. Select stocks have crashed 30-50 per cent as the initial euphoria over a stable government and unprecedented reforms have died down. Investors are no longer ready to pay a hefty premium for government stability and hopes. Take a look at stocks that have crashed dramatically in the last few months. A lot of reforms were expected for government banks, but, markets are now doing a realty check for PSU banking stocks, which they feel are heavily saddled with bad debt and bribery scandals. Take a look at govt banking stocks that have crashed in the last three months.

IDBI Bank

In early July, IDBI Bank was trading at a price of Rs 110, the stock has now almost halved to Rs 60. A loss of a cool 45 per cent in the last three months. Worries over loans to companbies affected by coal block allocations has weighed on the stock.

Syndicate Bank

Syndicate Bank like IDBI Bank has lost heavy ground in the last few months. The stock was trading at Rs 177 in early July, but, has crashed like most other peers and is currently trading at Rs 108. Arrest of its Chairman in a bribery scandal has ensured that investors sell into the stock at every given opportunity.

IOB

Indian Overseas Bank has also crashed from a price of Rs 85, until a few months ago to the current price of Rs 56. The bank is saddled with heavy non performing assets which is a feature of most of the government owned banks.

Oriental Bank of Commerce

Although it's known to be a better managed bank in terms of non performing assets, the stock has nevertheless lost 30 per cent in between July and Oct.

The list of other govt banks that have fallen include the likes of Canara Bank, UCO Bank, Dena Bank and others. The bigger players like Bank of Baroda and Punjab National Bank have seen a lesser price damage.

Should you buy these stocks now?

How far these stocks will fall is difficult to say. But, if they do fall another 10 per cent or so, these stocks would be an excellent buying opportunity as the dividend yields would turn attractive.

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