IS IT TIME TO EXIT FROM PSU BANKING STOCKS?

about 11 months ago
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By Ruma Dubey

There is a virtual massacre on the PSU bank stocks.

Take a look at the top losers, be it Nifty or BSE; all losers are PSU banks, with Union Bank, PNB, Allahabad Bank alternating between the top spot of losers.

On the BSE Bankex, all banking stocks are in the red, except for Kotak Bank, which is just about holding to the green.

With more and more worms coming out of the can, with the new Rs.800 crore Rotomac scam adding to the already miserable situation, the situation as of now for the beleaguered PSU banking sector looks very bad.

The biggest question doing the rounds – should we sell lock, stock and barrel and get out of all PSU banking stocks, even if it means booking losses?

Panic will always dull your intelligence and any knee jerk reaction taken under the influence of fear proves to be not just wrong but detrimental.

So stay calm and best to understand that this is not the time to sell off like as though it’s a sinking ship. Also, it does not seem prudent to go bargain hunting as the PSU banking stocks scale new lows.

Bottomline – this is simply neither the time to sell nor buy into PSU banking stocks. But yes, if you are trading the Banking Nifty or Bankex, get out, exit.

This rout and bloodbath will not get over in a flash. There have been just too many scams and this one is the mother of all. Already reeling under mounting NPAs, which banks have been cleaning up, the situation has once again escalated. Thus as of now, we do not really know the extent of the hit which these banks will have to take; only that will give us a much clear picture to take any sane buy/sell decision.

Also remember, these PSU banks are the back bone of our economy – 21PSU banks account for over 65% of banking assets while the collective bad loans of these banks stands at a staggering Rs.9.5 lakh crore; so there is no question of the Govt allowing them to down the shutters or shut shop.

But at this juncture it would help to know what concrete steps are being taken to ensure that such frequent frauds do not happen. Bank recapitalisation is just not enough and it is putting the burden on us the people. All that we have done till now has been useless – that’s what Nirav Modi has proved. RBI needs to put on its thinking cap and really come with very solid measures.

There is a massive breach of trust and this can be restored only when assurance comes that there would not be a repeat of the same scams over and over again.

If at all you need to go bargain hunting, go for the private sector banks – HDFC Bank is the top pick, followed by Kotak Bank. Do not buy into any PSU bank stock as of now, wait.

You cannot start having the attitude of booking losses – that way you will never, ever make any money on the stock exchange.

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