Several blue chip banking names hit 52-week. Among these include the likes of Axis Bank, ICICI Bank, Canara Bank, State Bank of India and Punjab National Bank.
These are some of the biggest banks in the country, along with them being well managed. ICICI Bank hit a 52-week low of Rs 247.70, State Bank of India was down to Rs 225.10, Canara Bank to Rs 240.70, Punjab National Bank at Rs 123.70 and Axis Bank at Rs 447.
Greenshoots of economic recovery
The Index For Industrial Production (IIP) has come in at a 5-year high of 9.8 per cent for the month of Oct. This indicates a solid economic recovery. As economic recovery gathers steam we are likely to see a surge in credit demand. This should augur well for the banking sector.
A private sector bank like ICICI Bank is trading at a price to earnings multiple of just 11 times, likely one year forward earnings. Axis Bank on the other hand is trading at a price to earnings multiple of just 12 times. Price to book value for ICICI Bank is just about 1.8 times. This makes the stock, a great buy at the current levels.
This is the same for some other stocks like State Bank, Canara Bank and PNB. In fact, for stocks like Canara Bank, the dividend yield itself can go as high as 5 per cent.
Non performing assets may have peaked
For the banking sector we believe that the non performing assets may have peaked. With banks doing their utmost in terms of recovery and there being some economic recovery, it's highly possible that non performing assets may have peaked. Should that happen, it is highly possible that banking stocks could rally in the coming days. These stocks are a great buy at the current levels.
The worries over the US Fed hiking interest rates, have pushed stocks lower, we haven't seen banking stocks at these levels in the last one year. Thus, they become excellent picks at the current levels. If you have a 2-year perspective it is highly likely that you could at least get a 50 per cent return on your stocks from here on.