PSU Bank stocks firm in otherwise weak market; Morgan Stanley bullish on sector – Check target price of BoB, BoI, PNB, Canara Bank

Shares of public sector banks (PSBs) were on a roll during Tuesday’s trading session, surging up to 15 per cent on the NSE. The Nifty PSU Bank index was soaring in an otherwise weak market on the expectation of strong earnings momentum in the quarters ahead.

The Nifty PSU Bank index hit a new high of 4,277.75 intraday trade, up 3 per cent. At around 02:45 PM, the index was up over 1 per cent to 4,201.55 as compared to a 0.50 per cent fall in the Nifty 50 index.

Individually, shares of Punjab and Sindh Bank surged most by over 15 per cent, followed by Union Bank up over 5 per cent and Bank of India up nearly 5 per cent on Tuesday. While UCO Bank, Indian Bank, and Indian Overseas Bank shares were up between 2-3.5 per cent intraday on the NSE.

Similarly, Central Bank, Bank of Maharashtra, Bank of Baroda, and Punjab National Bank were up between 0.5-2 per cent on the NSE today. Among all, PNB shares touched a new 52-week high of Rs 57.35 per share, after surging by 4 per cent today.

On the contrary, India’s largest lender State Bank of India succumbed to market pressure as it slipped over 0.5 per cent on the NSE, while Canara Bank was down over 1 per cent intraday today.

Morgan Stanley Bullish

Public sector banks have done well so far and expectations are that they may continue the robust performance in the coming quarters, global brokerage firm Morgan Stanley said in its report.

The brokerage sees higher margins, sustained loan growth, and improving operations leverage over the next few years for PSU Banks. Going forward, it expects loan growth to be sustained and credit costs to remain benign of the state-owned banks.

The brokerage maintains an 'underweight' stance on Canara Bank with a target price of Rs 345 apiece, while an 'overweight' rating on each Bank of Baroda and Bank of India with a target of Rs 220 and Rs 125 per share, respectively, and 'equal weight' call on PNB with a target price of Rs 60 per share.

Share Price History

Nifty PSU Bank has reported the highest returns among all other sectoral peers as it zoomed over 62 per cent year-to-date as compared to over a 5 per cent rise in the Nifty50 during the same period.

In the last one month, the PSU Bank index has also outperformed the benchmark by surging around 14 per cent as compared to over 2 per cent gain in Nifty50.