Buy These 3 PSU Bank Stocks, They Are Available At Discount To Long-Term Averages

PSU banks stocks that are available at discount

From the above table, it can be seen that the stock of Indian Bank is the cheapest in terms of valuations and hence is a solid pick. The shares of Indian Bank are available at a price to earnings multiple of just 3.5 times and are available at a discount of 66% to long-term averages as per the Motilal Oswal Bulls & Bears, handbook on valuations in India.

Why you should buy select PSU bank stocks?

According to the handbook, PSU Banks are trading at a P/B of 1.1 times, near their historical average of 1 times. “Some public sector banks reported lower slippage trends v/s select Private Banks. The corporate cycle is also clearly turning, and we expect public sector banks to benefit from it,” says the Motilal Oswal Bulls & Bears, handbook on valuations in India

The brokerage has also noted that the earnings outlook is improving, led by a reduction in credit cost estimates, as most public sector banks have strengthened their provision coverage over the last couple of years.

“Select public sector banks have also undergone a capital raise to prepare themselves for growth opportunities. Also, the current capital position of most public sector banks has improved,” the Motilal Oswal Bulls & Bears, handbook has said.

SBI and Indian Bank are stocks to buy from the PSU banking space

Within public sector banks, State Bank of India appears well-positioned to report a strong up tick in earnings, led by a normalization in credit costs and improvement in the business momentum in both the Retail and Corporate segment.

“Among PSUs, we estimate State Bank of India to reach a decade-high RoE of 15% by FY23E. SBI remains the top share to pick,” the brokerage has said.

Emkay Global and Motilal Oswal have upside of almost 31% to 34% on the stock on SBI. Last month the brokerage firm Emkay Global raised the target price on Indian Bank to a whopping Rs 225 from the current market price of Rs 135.

The 2 stocks of Indian Bank and SBI would remain the top stocks to buy, because of what analysts are betting and the discount to long term averages on these stocks.

“Overall, most public sector banks are trading at reasonable valuations, with an improving earnings outlook,” Motilal Oswal has said in its bulls and bears handbook.

Disclaimer

Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Investors should take precaution because the markets are near record highs.