Tabassum Inamdar hit the nail on the head when she and her ace team at Goldman Sachs released a report in March 2014 titled “Neglected PSUs poised for rally on emerging macro/political clarity; Buy SBI, BOB” and urged investors to buy truck loads of PSU Bank stocks. Tabassum rightly predicted that Indian banks, especially high-beta PSU banks, could be at the cusp of re-rating given improving macro and likely political clarity post the upcoming elections. She added that a sharp correction in current account, falling inflation, reforms in power and road space, as well as deleveraging efforts by corporate India could lead to reduction in stressed assets, revival of investment activity, and improvement in the earnings trajectory for banks.
In hindsight, Tabassum Inamdar’s call was really a no-brainer. The writing was on the wall that the risk-reward ratio was in favour of an investmnent into PSU Bank stocks.
Rajesh Mascarenhas of ET had in February 2014 prepared a detailed report titled “PSU banks near bottom, time right for buying” pointing out that PSU Banks were quoting at rock-bottom valuations. He explained that stock prices were much below the book values and that there was also a high dividend yield.
What became clear is that PSU Banks could only go one way and that was up. The downside was restricted while the upside was huge.
Well, in just the last six months, the CNX PSU Bank Index has given a fabulous return of 57%. The YTD return is 32.50%.
Speaking for myself, I already have a nice little chunk of Kotak PSU Bank ETF sitting pretty in my portfolio. I used the time when these stocks were not in favour to systematically buy into them.
If you don’t have PSU Banks in your portfolio, you need to read up the reports by Tabassum Inamdar & Rajesh Mascarenhas and take an informed decision.