Recent market activity and specifically banking sector activity remain very interesting in this week. Due to further discovery of more frauds in few Public sector banking created pressure for all the PSU banks in last few days. Most of the PSU banks are now trading at around their 52 week lows as compare to fresh made 52 highs recorded in them earlier on Recapitalization news.
I remember when PNB was around Rs 200 during recapitalization buzz and at that time, experts/analyst were expecting more upside in long-term. But from that levels, stock has keep declining resulting in a erosion of 50 percent market capital. Currently, PNB stock is trading now around Rs 100.
After discovery of Nirav modi fraud amounting Rs 11,400 crore, we had seen a sharp fall in PNB stock moving it towards Rs 125. This level was a good base for stock where stock remain stable for few days but after that it again started falling. When PNB notified exchanges that Fraud number could even go up to Rs 13,000 crore, stock seen further selling pressure. And therefore, stock also broke level of Rs 100 and made a low of Rs 92. However, from lower levels, stock has seen some recovery.
There is now doubt that still PNB is in negative trend and it may see some more selling pressure soon. But at the same time, it is also true that stock has already lost huge amount of market capital in last few days. And now, stock is trading at that levels where risk is remain much lower than higher upside. In lower side, I think any further fraud if discovered in PNB may lead the stock price falling close to Rs 80 but in extreme bearish situation. Whereas in higher side, stock has a clear chance to reach around 130-140 in few weeks.
Therefore, I think investors or traders who really wants to make a position in PNB can go ahead. But remember, as the stock is very volatile, avoid any bulk buying because it could be very risky.
For other Banking stocks also, I think some of the banking stocks are available at a good price for short-term. PNB fraud is negative for the whole sector but it’s impact will remain only for short-term. The only problem now is how PNB would handle this Scam and when it will fund the credits provided by other banks to Nirav modi and its firms. So, be cautious and keep avoiding bulk buying in PNB. In PSU, I think stocks like Syndicate bank, Union bank could be the great options to buy at current levels.
In case of IDBI, I think the real value of IDBI bank is around Rs 80 which it has already achieved in recent rally. Whereas PNB was consistently falling, a new buying emerged in IDBI during fall in PNB which pulled it from Rs 60 to Rs 84 within a few days. So, as of now IDBI doesn’t looks attractive at current levels. And therefore, I would suggest to avoid it because there are much options available now in market as compare to IDBI.
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