Bank Stocks: Time to accumulate
Dr BA Sastry Presently, banking sector is going through a turbulent times as stressed assets is on the...
Dr BA Sastry Presently, banking sector is going through a turbulent times as stressed assets is on the rise and stock prices are under pressure due to asset quality concerns. However, these is ideal time for long/medium term investing in bank stocks. Most of the PSU Bank stocks are available nearer to their year lows and these banks will declare dividends declaration in about 4 to 5 months, real annualised yield is more than double that shown in the table under the column Dividend Yield. Hence, this is the time to start accumulating the stocks for both dividend and capital appreciation over a period of time. If the stock is held for about 17 months, share holders would receive dividend for two years. As Interest rate cycle has peaked out and is on the decline, there would be more demand for credit and banking sector would benefit the most. Caution: The investors need to remember that stock prices might continue to underperform because of asset quality concerns and current year being a pre election year, there could be political pressures too for more lending for priority sector which could result in higher NPAs too. Considering even the above, PSU Banks seem attractively priced from Medium term point of view and quality for Value Buying and presents a case of better Reward compared to the Risk involved.
19 July 2019 7:49 AM GMT