Synopsis
After a gap of almost three months, PSU banks witnessed an across the board up move. If one looks deeper, even in the last three months of correction or rather consolidation, the cut in PSU stocks was not very high. They moved in a sideways range. This is very different if one takes into account how the stock used to lead the correction earlier. The re-rating of PSU banks has to be divided into three parts, the first part which was about clean up of the banking system which was full of NPA brushed under the carpets and they got cleaned up and their balance sheets became more reliable. Second part was mergers which meant improvement in the operational efficiency. Now it is the third part, which is more important, growth and that too profitable growth. Is now the street getting ready to re-rate them because of loan book growth, which is showing green shoots due to the capex cycle starting back
In developed markets, transportation stocks are seen as an indicator of the health of the economy. In case India, it is the banking stocks, because they are reflecting the under current of the economy. Can a stock market rally in India be a sustained one if the banking sector is not participating in it ? The answer is No. So today, when the banking stocks are making a comeback, especially the PSU banks, should one be surprised ? The fact is that
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