PSU Banks Vs Pvt Banks

Apr 28, 2021

Brijesh Bhatia, Research analyst

It's a never-ending debate in the Indian stock market.

PSU banks versus private banks. Which ones should you favour?

In this video, I'll share my view.

I'll show you why PSU banks still have a long way to go.

And why the risk-reward equation is in your favour in these stocks.

Hello viewers. Welcome to the Fast Profits Daily video series. Myself, Brijesh Bhatia.

So there is always a debate on when it comes to investing between private banks and PSU banks. If you look at the recent rally, after markets hit around 14,151 levels, most of the private banks have seen a huge recovery by nearly more than 10%.

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So, I would say it depends on banking to banking.

So ICICI Bank we have seen somewhere around 530-535 levels back to 600. Even Axis Bank has seen a huge recovery reclaiming 700 levels. Kotak Bank below 1,700 levels and back to 1,760-1,770.

So we have seen banking coming back strongly into the private side. What about PSUs? Should you invest in PSUs?

Well, I won't say yes from a trading per se. From an investment point of view, yes PSUs offer a better risk reward at current point of nine. So the first chart I want to show you is the PSU Bank index weekly chart.

 

So if you look at the screen, three things over here. First, the 2013-2016 low somewhere around 1,900 1,894 which is around 1,900-sub levers. Since that was broken, we have seen down side coming into the index and now, when it has broken those resistance levels which will now want to be a support, if you look at that red line, that line will now major support.

So if you look at the markets from 15,400 levels Nifty back to the retracements, we have seen retracements in the PSUs as well and if you look at it from the highs retesting around 1,900 levels, is a crucial support zone and we have seen this week, there was a slight recovery coming in last week.

If you look at the candlesticks, those of you who are following candlesticks, it's a Doji candlestick and a Doji forming basically they're a reversal in nature, and it's very much important where they form.

So they're forming right at crucial support level, I would say demand zone and prices are reacting onto the reversals, and that is a big, big sign for me as a reversal structure.

Plus again the RSI. If you look at it, back to the demand zone on the weekly scale round the 30-35 zone, which is again being an oversold territory, I believe that whenever it's 40 or 35 levels on the RSI, prices are at support, a crucial support, it's good bet to look at it on a risk-reward point.

 

To look at the out performance over the Nifty, we have done a comparative ratio chart over here. So what we have done is we have divided Nifty PSU index price with Nifty price.

So if you look at the structure over here, it broke out of a rising trend line and re-tested those levels. Now, it is slow and steady recovering and moving towards these northwards trajectory.

So we believe that, yes, a break out, a retest on the ratio chart, plus a break out and re-test on the weekly chart of the PSU index, even if that's a 50 weekly average, again and giving a crucial sign of goods of zone for me.

So, definitely look for a PSUs over here. Well, you might be thinking then why banking looks good? Why not private banks? Yes, as I said, it's always debate between looking for private and PSUs. So you can think that private offer a better returns.

Here, I am more focusing on better risk-reward over here. So PSUs as of now, offers a better risk reward more than private because they're up around nearly 10% from the lows. Depends on stock to stock, what you're looking at but yes, on the PSU side, I would stay on the likes of SBI, BoB, PNB, where with the returns, which I am expecting these stocks on the largecaps, offer better margin of safety as well.

So stick onto those PSUs on the larger side, like SBI, BoB, PNB or any stocks where you find better margin of safety on the stock and definitely I believe that next 3 to 6 months, we might see a huge rally coming in PSU stocks.

Signing off. Thank you.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

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1 Responses to "PSU Banks Vs Pvt Banks"

Vivek Malekar

Apr 28, 2021

Sell in May & Go Away was a good input. However, it would be more meaningful to find out as to what is the NIFTY retrun in 3 -4 months ( May, June, July, Aug) is last 25 months when previous month has performed in a perticular fashion. e.g. return in June if May returns in that year was above certain threshhold ( lets say 12%+)

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