13 PSU banks hit 52-week lows; should you start cherry picking?

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Even the banking stocks that trade above their year-lows have not been performing.
Thanks to the rout in domestic stocks last week, shares of as many as 13 public sector banks (PSBs) are trading at 52-week lows. All listed PSBs have given negative returns, falling up to 40 per cent this calendar.

Allahabad Bank is the worst hit, down 40 per cent year to date (YTD). It hit the 52-week-low of Rs 11.1 on Friday. Canara Bank and Syndicate Bank, which have fallen about 34 per cent each, have also hit the year lows.

Among other PSBs that slumped to 52-week-low on Friday are Bank of India, Punjab National Bank, Union Bank of India, Oriental Bank of Commerce, Andhra Bank, Indian Overseas Bank, Bank of Baroda, Punjab & Sind Bank, Indian Bank and Central Bank Of India.

Analysts, however, do not expect them to bottom out soon. They advise to avoid the sector entirely.

“PSU banks are in terrible shape. Most stocks are making 52-week lows and there are no signs of bottoming out. We have recommended our subscribers to stay away from this space because you really do not know where this is going to end in terms of its downtrend,” said Gautam Shah, Founder and Chief Strategist at Goldilocks Premium Research.

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Public sector banks have been battling massive compilation of bad debts in their books. The government had to infuse huge capital to sustain them in the last couple of years.

“The majority of them are still struggling with capital. Issue of non performing assets (NPA) has not gone away. So I think there is only one name frankly that one can think of in the PSU space. We are underweight in that segment,” said Mihir Vora, CIO at Max Life Insurance.

Even the banking stocks that trade above their year-lows have not been performing. SBI is down 9 per cent, Bank of Maharashtra and United Bank of India 19 per cent each, UCO Bank 26 per cent and CorporationBank has fallen 34 per cent in the last two months.