After posting a spectacular turnaround so far this year, the Nifty PSU Bank index continued its dream run in Wednesday's (September 13) trade, reaching record high levels. The PSU bank shares spurted up to 10 percent, taking the sectoral index, Nifty PSU Bank, to a 52-week high level.

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The Nifty PSU Bank index climbed more than 4 percent to hit a record high of 4,948.55. The index has gained 13.56 percent so far this year as against a 10.29 percent rise in benchmark Nifty. In the last one year, the index has rallied 53 percent versus a 11.48 percent rise in equity benchmark Nifty.

The 12-pack index of all state-run banks are trading with gains, with shares of Punjab National Bank rallying the most at 9 percent.

Among other individual stocks, shares of Indian Overseas Bank jumped 6.96 percent, Central Bank of India 5.98 percent, UCO Bank 4.75 percent, Punjab & Sind Bank 4.28 percent, and Bank of Maharashtra 4.14 percent.

Meanwhile, Bank of Baroda, Canara Bank, Bank of India, Indian Bank, Union Bank of India shares gained in the range of 3-6 percent. State Bank of India shares were trading a percent higher.

Will PSU banks rally further?

According to analysts, the PSU bank sector can give decent returns in the coming days. "With the individual PSU Banks such as SBI, Bank of Baroda, Canara Bank, PNB, Union Bank, CUB, Federal Bank, Bank of Maharashtra, Bank of India, Central Bank of India and Indian Bank all looking good with much upside scope visible, the sector can gain decent returns in the coming days," said Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher.

Swastika Investmart's Head of Research, Santosh Meena recommended investors to add these top three PSU banks stocks — SBI, BoB, and PNB — to their portfolios. "They can also allocate a small portion of their portfolio to smaller PSU banks, as these stocks are high-beta and have the potential to generate higher returns," he noted.

What chart pattern suggests

"The Nifty PSU Bank index has broken out to multi-year highs, gaining more than 10 percent in September alone. The chart pattern suggests that this is just the beginning of a rally, but intermediate corrections cannot be ruled out," Meena said.

He further said that the 4600-4450 range has become a strong support zone for the Nifty PSU Bank index. If the index sustains above this level, it could move up to the 5800-6000 range.

"The PSU Bank weekly chart has indicated a breakout recently above 4680 zone and has entered into a new territory with immense upside potential visible to retest the all-time high level of 5375 zone in the coming days," according to Parekh.

"The near term support would be at 4600 zone and with the RSI also well placed indicating strength, the parameters are all supporting our positive recommendation," she added.

Market expert Prakash Diwan said that that all PSU banks will likely rally given the way things are moving. "So, that is a pocket that you could definitely make some money on. But from a longer term perspective, you need something which continues beyond a year and a year plus and that's where this bank would probably be feature better," he said.

"I would reiterate my call in Bank of Maharashtra, it's one of the smallest of the lot, it's nothing very significant. It's not the top three that gets talked about. Every time we talk about SBI, PNB, BoB in the same breath and they behave in a similar way - these small banks are semi- turnaround, semi-growth opportunities," Diwan said.

"While its down about 30 percent after the last quarter numbers, there is still enough headroom for it to grow without getting stretched on any other parameters. The balance sheet probably has the ability to continue that growth. It's a business that - the footprint is so uniquely placed that it will start growing as you see improvement in the demand side on the rural economy, with the kind of traction coming back in some of the smaller segments, smaller geographies of the market and that's where it's present," he noted.

"Nifty closed on a positive note. Most of the sectoral indices were in green at the closing, with the Nifty PSU Bank index leading the way with gains of 4.23 percent; lower deposit-to-credit ratio, focusing more on high-yield products, and introducing technology into PUS banks would all help the sector's banks attracting more investors by boosting profitability and fostering development," said Vaibhav Vidwani, Research Analyst at Bonanza Portfolio.

First Published:Sept 13, 2023 4:17 PM IST