Is it time to lap up PSU banking stocks?

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Is it time to lap up PSU banking stocks?
Last week there was a spectacular rally in most of the PSU banking stocks. The rise was largely on hopes that non performing assets at these banks may have peaked. Also, hopes of a revival in the economy would push credit demand saw large scale buying in these stocks.

Opinion polls also showed the NDA way ahead of the other parties in the polls also fuelled buying interest in these stocks.

Now, one reason why there could be more room for upside in these stocks is that they are available at very attractive levels.

Most of the PSU banks are quoting at levels of under 0.50 times book value. Some of the banks in this category include Canara Bank, Syndicate Bank, Andhra Bank and Indian Overseas Bank.

A few are quoting at price to earnings multiple of just 5-6 times, including the likes of Bank of India, Syndicate Bank and Canara Bank. These is way cheaper than private sector peers.

Now some of these stocks are trading way below their 52-week highs. Take the case of Canara Bank. On May 20, the stock was quoting at Rs 456 and is now trading at Rs 238, almost half the value. Union Bank of India on the other hand was trading at Rs 255 in May 2013 and is currently trading at just Rs 116. Similar for others like Indian Bank, Allahabad Bank and Punjab National Bank.

There are signs that the economy may have bottomed out. Also, the possibility of a Narendra Modi led government at the centre pushing through the reforms process is likely to boost sentiment for these stocks.

Clearly, looking at the attractive valuations, low prices and hopes of economic recovery, these stocks maybe a good bet at the current levels.

Story first published: Monday, March 17, 2014, 8:59 [IST]
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