PSU bank stocks are witnessing hectic activity these days and are now among the top traded stocks on the bourses.
Even as concerns over PSU Banks' asset quality and growth rates remain, there are few that offer a favourable risk-reward equation.
India's largest PSU bank, State Bank of India, delivered excellent results, once the impact of a big jump in employee expenses was adjusted for. The net interest income (NII) beat the Street due to a better net interest margin (NIM) and good loan growth. The credit growth at 5.2 per cent quarter-on-quarter (Q-o-Q) (15 per cent year on year) was excellent for a large bank.
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This is the first tranche of capital infusion for the fiscal and more funds would be provided in future depending upon the performance of PSU banks.
Public sector banks have raked in more profits in the three months ended June on the back of a persistent decline in bad loans and the trend may have a positive bearing on their balance sheets in the coming quarters. In the June quarter, Bank of Maharashtra (BoM) and State Bank of India (SBI) were in the lowest quartile as far as Gross Non Performing Assets (NPAs) and net NPAs were concerned, according to an analysis of the quarterly financial numbers published by the public sector lenders. Cumulatively, all the 12 public sector banks reported a profit of about Rs 15,306 crore in the three months ended June, registering an annual growth of 9.2 per cent. However, leading public sector lenders -- SBI and PNB -- posted lower profits in the June quarter.
From the Sensex pack, Larsen & Toubro jumped 4.26 per cent to emerge as the biggest gainer, followed by IndusInd Bank, Tech Mahindra, State Bank of India, HCL Technologies, Power Grid, NTPC, Axis Bank, Kotak Mahindra Bank, HDFC Bank and Wipro. Mahindra & Mahindra, Infosys, UltraTech Cement and Hindustan Unilever were the major laggards.
Analysts say there is still no visibility of earnings improvement.
A high-level committee on oil PSU recast has advised against merger of any state-run firms and recommended a national shareholding trust to hold government stake in them.
If the status is approved for ITI, it will get preference in the supply of technology products required by the defence services.
There are four public sector general insurance companies.
Analysts seem to be generally pessimistic about Bharat Heavy Electricals (BHEL). Out of 15 brokerages with recommendations since May this year, two have 'buy' while five have 'sell' and eight have 'underweight'/'reduce'/'underperform'/'hold' recommendations. The average target price of the public sector undertaking (PSU) is Rs 61. However, the stock has been consistently hitting new highs, which indicates that there is some kind of valuation mismatch.
Conflicting views on Coal India (CIL) might leave investors confused. The bullish perspective that India has strong power demand (and also high steel production) means high demand for coal. As CIL is the monopoly producer of coal -- supplying over 80 per cent of the domestic requirement - the public sector undertaking should be a beneficiary of the rising power demand.
Fundraising through qualified institutional placement (QIP) has revived this year, led by commercial banks, after a lacklustre 2022. According to data compiled by Prime Database, Indian companies have raised Rs 53,070 crore in 2023 so far, of which seven banks - Union Bank of India, Indian Bank, Bank of India, Federal Bank, IDFC First Bank, Bank of Maharashtra, and J&K Bank - account for Rs 21,290 crore, or about 40 per cent. If other financial institutions are included, the figure surges to Rs 26,690 crore.
Reliance Industries Ltd was the biggest wealth creator during the five-year period from 2018 to 2023 while Adani Enterprises Ltd was the top all-round wealth creator, according to a study by Motilal Oswal Financial Services. The study, based on stock market performance of companies, said for the fifth time in succession, Reliance emerged as the largest wealth creator, adding Rs 9,63,800 crore wealth over 2018-23. It was followed by Tata Consultancy Services (Rs 6,77,400 crore wealth addition), ICICI Bank (Rs 4,15,500 crore), Infosys (Rs 3,61,800 crore) and Bharti Airtel (Rs 2,80,800 crore).
'The Nifty index looks to be 20 per cent overvalued as per our model after moving up more than 10 per cent in the last two months.'
ICICI Bank was the biggest loser in the Sensex pack, slipping 2.81 per cent, followed by Mahindra & Mahindra, State Bank of India, UltraTech Cement, IndusInd Bank, Kotak Mahindra Bank, Tata Motors, Bajaj Finserv, Axis Bank and Power Grid. Tech Mahindra, Bharti Airtel, Infosys, Asian Paints, Hindustan Unilever, Larsen & Toubro and Titan were the gainers.
'Historically, the markets tend to perform well during election years as governments aim to increase spending and call attention to growth.'
In the past 10 trading sessions, shares of the state-owned company have shot up more than 50 per cent.
The second central public sector units (PSU) pay revision committee report has suggested a new classification of state-owned companies linking salaries and remuneration to productivity and performance.
The rally in PSBs, analysts feel, was more a knee-jerk reaction to the development, and the actual benefits will start to accrue once the addition takes place in 2024. "The actual benefit for banks from the inclusion in JP Morgan's EM Index will accrue from June 2024 onwards. "Until then, the larger fundamentals of the market will dictate the moves. "Once the initial euphoria subsides, bond markets will look to global cues which may trigger fresh selling," said Siddharth Khemka, head of retail research, Motilal Oswal Financial Services.
The decision assumes significance following the enthusiastic response from retail investors in the Friday's stake sale in steel major SAIL, which fetched the government Rs 1,715 crore (Rs 17.15 billion).
In August, the Reserve Bank of India Governor Shaktikanta Das held a meeting with chief executive officers/ managing directors (CEOs/ MDs) of large non-banking financial corporations (NBFCs). The discussions included diversifying borrowing sources for NBFCs and housing finance companies (HFCs) to contain increasing reliance on bank borrowing, risks associated with high credit growth in retail segment in unsecured loans, prioritising IT upgrades and cyber-security, improving provisioning, monitoring of stressed exposures and slippages, ensuring robust liquidity and asset-liability management, ensuring transparency in pricing, creating robust grievance redress mechanisms.
The government has now made it "practically impossible" for political appointees to find a place on the boards of the public sector units (PSUs) as independent directors (IDs), a top official said.
The overall debt servicing metrics of Indian corporates are weak.
Constituencies that are going to the polls in the first phase, slated for April 19, have just 19 days for campaigning. Contrast that with those going to polls in the 7th phase, notes N Sathiya Moorthy.
Finance Minister Nirmala Sitharaman on Tuesday held a review meeting on credit guarantee scheme with heads of public sector banks, and asked them to expedite loan disbursement under the Rs 3-lakh crore ECLGS for MSME sector, hit hard by coronavirus-induced lockdown. The meeting on Emergency Credit Line Guarantee Scheme (ECLGS) was held through video conference, and the minister appreciated the efforts of banks in execution of the scheme.
The AAP on Wednesday last had posted a video story on 'X' featuring industrialist Gautam Adani and Prime Minister Modi. The next day, the party posted a picture of Adani and Modi, and alleged that the prime minister works for the industrialist and not the people.
In the last two months, these stocks have lost nearly a quarter of their market cap.
Stocks of government probables for divestment or stake sale such as Steel Authority of India (SAIL), Mahanagar Telephone Nigam (MTNL), National Aluminium Company (Nalco) and Container Corporation (Concor) have outperformed the markets in the past one year.
At present, to be eligible for the job of chairman, a person from within the company should not be even a day older than 58 years.
A local official confirmed the incidents but said the causes of these suicides were yet to be ascertained.
Sensex has six while Nifty has only 10.
Diktat to four general insurance companies says 'avoid competition' in any corporate or group account
Calling a ministerial group formed to look into their wage demands an eyewash, PSU oil firm executives today said they will go on indefinite strike from January 7, as the government has failed to live up to its promises of giving officers a fair deal.
The divergence shows lack of financial depth in the Indian stock markets.
Air India has very often been slammed for living off taxpayers' money - an impression that was patently wrong till a couple of months ago when the first tranche of Rs 800 crore was given to the airline as additional equity by the government
The government on Tuesday gave greater autonomy to state-run banks, allowing them make domestic and overseas acquisitions without its approval.
On government's last week's announcement of revamping of PSU banks, Fitch Ratings said the move is "credit positive, but risks remain".
'I would say restore the banks to health, get active board composed of professionals, then there will be an ideal situation for merger.'
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