In which sector you should invest now after cabinet meeting

Road Infrastructure
Our markets even after diwali are continuing their uptrend which helps nifty today to cross levels of 10300. Telecom, NBFC and Steel sector are among top contributors in this uptrend. However, yesterday conference of cabinet changed the whole scenario of markets today. Cabinet approves the recapitalisation plan for PSU Banks. One more major step taken by cabinet was of road projects of 7 lakh which would complete in 5 years. These both today shaked the overall buying interest of investors. Those who were discovering opportunities in NBFCs today looked the low valuations of PSUs banks.

Terrific buying in PSU Banks on Wednesday trade

Most of the Public sector banks were quoting above 15 percent gain intraday. But Stocks like PNB, Canara Bank rose upto 50 percent today. Whereas heavyweights like SBI, ICICI bank also rose upto 30 percent. Amount of Recapitalisation plan which is over 2 lakh crore will be available for PSU banks soon. But today’s rally of banks was so marvelous that i think PSU banks have already seen addition of almost same amount of cabinet plan today in their combined market capital.

I think cabinet plans for improving conditions of different sectors are positive for our economy. Whereas recapitalisation plan will positively impact the PSU banks in long-term, road projects of Rs.7 trillion will help infrastructure companies to strengthen their order books. However, i think a great spike in banks that we saw today is because of their low valuations and transfer of funds from banking sector to NBFCs in past few years. That’s why, when PSU banks were rising in today session, other private banks and NBFCs were simultaneously loosing their share prices. Although, i think today we have seen a large change in our market funds interest.

Which one is better now, PSU banks or Infrastructure stocks?

Now, the point is whether the rally would continue or one should exit from PSUs? I think today’s rally was a great breakout for most of the PSUs which would help them in future for more gains. But at present, i don’t think PSUs would be a great option for any investment for a period of 2-5 years. In a single trading session, upto 50 percent rally in the large cap banks is not a joke. Therefore, it is better to buy those Infrastructure companies having great exposure to road construction activities for a period of about 5 years.

However, some banks like PNB, IDBI, Union bank may give you a good return in short-term as they have more remaining space in their fundamentals for more gains. Whereas, on the side of Infrastructure, i think those having great exposure to road constructions like Ashoka Buildcon and many more stocks, can give you a great return in long-term.


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