PSU bank stocks: 10 multibaggers in 5 years of Modi government
PSU bank stocks have soared during Modi's second term, with Indian Overseas Bank leading at 472% returns. Despite this, they trade at a discount, making them potential outperformers. CLSA identifies SBI, Canara Bank, and Bank of Baroda as Modi stocks poised for growth.
The rags-to-riches story of has delivered multibagger going up to 472% to in Prime Minister Narendra Modi's second term. Ten out of 12 have more than doubled investor wealth during the period.According to data from Ace Equity, was the top performer among PSU banks, delivering 472% returns during the Modi 2.0 tenure. and followed, with returns of 325% and 226%, respectively. Additionally, , (SBI), Indian Bank, Canara Bank, Punjab & Sind Bank, Union Bank of India, and Bank of Baroda provided returns ranging from 106% to 150% over the last five years.
However, two PSU bank stocks, Punjab National Bank and Bank of India, managed only 52% and 44% returns, respectively, in the given period.
Despite the stellar returns PSU banks have given in the last couple of years, the sector can still outperform their private peers, says Hardick Bora, Co-Fund Manager at Union Mutual Fund.
"We note that, on average, the return on equity of PSU banks is in line with their private counterparts. However, the valuations are at a 40-50% discount. We believe that for this to converge, PSU banks will have to grow at par with private banks while maintaining the current low credit cost," he says.
Meanwhile, a special interest this election season is in "," which have gained an average of 50% in the last 6 months. These are stocks of companies or sectors that have benefited directly from government policies and initiatives under Prime Minister Narendra Modi, making them attractive to investors looking to capitalise on government-driven growth.
This basket may continue to rally if the market celebrates a strong election result for the ruling party on June 4, say . Among PSU bank stocks, CLSA has identified SBI, Canara Bank, and Bank of Baroda as Modi stocks.
Should you buy Modi stocks?
Analysts at Kotak Equities say that the market seems to be discounting that BJP will get around 325 seats with most stocks trading at full-to-rich multiples and many "narrative" stocks and PSUs trading at unfathomable multiples.
If the fall below expectations, Modi stocks would be among the worst hit, at least in the short term.
"Notwithstanding this anticipation-fuelled rally, a few weeks after the election, investors will be confronted with a reality check that many of the positives these stocks may have started baking-in will be realised only in a gradual manner. This may drive profit-taking by the less patient holders of Modi stocks," CLSA said.
(Disclaimer: The views expressed by experts are their own and do not necessarily reflect those of The Economic Times)
Source: Stocks-Markets-Economic Times
