Banking Stock :

Banking Stock :

Wednesday, February 3, 2016

In one of my posts of 2015 ( 23.9.2015 ) , I have cautioned retail investors about equity shares of large banks. I have also explained my positions in that post. Today , I am writing another post about the banking stock of Indian market. In this post, I am not covering the PSU Bank stocks as these stocks are battered heavily over the last 5 months or more. However, I have an interesting view to present about PSU bank and I shall post this after couple of days. I promise that this view would bring in new twist to the PSU bank story which is unfolding today but not covered by most of the analysts. Please wait for that ....

In this post , I shall put stock price of 6 New Private Sector banks on two specific dates : 23rd September 2015 and 3rd February 2016. I have selected these two dates because I have posted my previous blog on this topic on 23rd September 2015 .
 

Equity Price of New Private Sector Banks 

 

23.9.2015

3.2.2016

% change

ICICI Bank 

273.35

204.05

-25%

Axis Bank 

511.7

380.55

-26%

Kotak Mahindra 

658.65

664

1%

HDFC Bank 

1049.2

1046.2

-0.29%

Yes Bank Limited

738.2

777

5.26%

Indusind Bank Limited

905.55

904

-0.17%

NIFTY

7845.95

7361.8

-6.17%

Bank NIFTY

17255.3

14834.05

-14.03%

Even though the NIFTY is down by 6.17% , two banks cracked by almost identical percent of about 25%. The remaining 4 banks are holding fine. In the month of October 2015, Angel Broking did recommend " BUY" for Axis Bank with a target price of Rs 630/- over a 12 month period. I am not saying that the price can not go up for Axis Bank . I want to say that if capital market is true reflection of the company's performance , the price should not go up. Recently, Morgan Stanley has recommended BUY option to Axis Bank . I am not convinced at all  about the logic on which basis  Morgan Stanley has recommended  this.  

With so many data points available in the public domain , it is quite easy to find out the degree of financial or accounting jugglery of listed companies. Today we can easily correlate data from MCA website, Credit Rating Agencies, Banks' Basel III disclosures , SEC Filings and so many other data sources. We do have exceptionally powerful data analytic tools to create strong association rules with these data points and then come to a logical conclusion about the actual position of the bank. Then we can validate the findings from the market information. 

In fact , I am doing this for selected companies for last 6 to 7 years in the Indian market. As all of you can find out that I predicted in 2013 about the present position of NPL in the banking system. My students in IIMC or IIM Ranchi or Great Lakes Institute of Management would be able to remember what I told them in the class about the risk management system or NPL position of Indian banks way back in 2010 . In all my training programmes , I did mention in all these in unequivocal terms. 

Based on my understanding and analysis , I can advise  retail investors to exercise exceptionally high caution while dealing with some of the new generation Private Bank stocks. Out of the six , price of two banks have manifested about 35% to 40% of its true positions . However two more stocks have to show its true colour in the days to come.

My advice to all of you who have hard earned money : " why do you want to loose your money by buying something which is not reflecting its true value at all "

Regarding " Interesting story unfolding for PSU Banks " ....... please keep a watch on my face book page.......