Banking stocks have failed to perform so far in 2023 despite robust credit growth and improving asset quality. The impact of the Adani crisis is also visible on the banking pack as some of the PSU bank stocks have corrected significantly from their respective 52-week high levels.
SBI stock is down 22 per cent from its 52-week high of Rs 629.65 and Bank of Baroda stock has corrected over 25 per cent from its 52-week high of Rs 197.20. Bank of Baroda reported a 75 per cent jump in standalone net profit at Rs 3,853 crore for the third quarter ended December 31, 2022, as bad loans declined. SBI reported a 68 per cent year-on-year (YoY) jump in net profit at Rs 14,205.34 crore for the December quarter compared with Rs 8,431.88 crore in the same quarter last year.
Which stock can deliver better returns in the near term?
According to Vaishali Parekh, Vice President – Technical Research, Prabhudas Lilladher Pvt. Ltd, SBI stock has witnessed a correction breaching below the 200DMA level of 540 weakening the bias and has got the next major support zone near the 500 zone which was the previous bottom made. From the current price, for the bias to improve, it needs to move past the 530 levels decisively to improve the trend. At the same time, a decisive breach below 500 levels would further weaken the trend with 475 as the next support level.
Talking about Bank of Baroda, Parekh noted that the stock has been forming lower tops on the daily chart and recently has slipped down resisting near the 50EMA level of the 170 zone and has indicated a weak bias. The near-term support would be around the 146 zone which is the previous bottom made where we anticipate some consolidation or else a decisive breach below would further weaken the trend. At the same time, for the trend to improve from current levels, it needs to cross the 162 zone decisively and anticipate for further rise.
“SBI has been under selling pressure for the second straight month now. Technically speaking, it is trading below all the major trading moving averages in the daily chart frame. The previous swing low around 500-503 should be acting as a support zone now which also coincides with the 89 EMA in the weekly chart structure. On the upside, any sustainable move above 540 odd zone should be considered as a positive development,” said Sneha Seth, Derivatives Research Analyst, Angel One Ltd.
Like all the other PSU banks, Seth added that Bank of Baroda too corrected almost twenty per cent from the highs of 197 seen in the month of December. The overall chart structure remains weak for this counter and follow-up selling towards the 150-145 odd zone cannot be ruled out. On the upside, 170-172 levels remain a study hurdle for now.
Brokerages have also maintained their bullish stance on SBI. KRChoksey believes SBI is better placed than its PSU peers to manage the uncertainties, given its size & leadership in the banking system. While sharing a target of Rs 750, it said the bank’s subsidiaries have been witnessing healthy growth and, thus, will continue to create significant value for its stakeholders.
Similarly, experts are bullish on the Bank of Baroda as well and believe that the valuation is attractive at this point in time. On Adani Group exposure, Prabhudas Lilladher said that the exposure could be 0.6% of loans, although the entire credit is secured and 30% of exposure is towards JVs having large PSUs as partners.
Notably, the State Bank of India (SBI), Bank of Baroda (BoB), Indian Bank, Punjab National Bank, and EXIM Bank — all public sector entities — have committed a loan facility of Rs 6,071 crore to Adani’s greenfield copper project, which is now in the spotlight.
The trio — SBI (Rs 1,846 crore), BoB ( Rs 1,750 crore) and Canara Bank ( Rs 1,000 crore) — have over 75 per cent of the loan exposure. There are no private or foreign banks involved in financing this greenfield project.
Also read: Adani’s Rs 8,673 crore copper project puts 7 public sector banks in the spotlight