Neither every great company is great stock nor every bad company is bad stock. There is time for everything and one has to be able to discern one from another. PSU Banks are in interesting phase and you can gauge that by first SBI having multi year break out and later we also talked about Bank of Baroda which is part of Tracker too.
PSU Banks are story of under ownership. Thing about under ownership is slight change in perception can result into big moves and that is exactly what happened right after budget.
First let’s talk about why we are talking about PSU Bank ETF.
What is ETF?
ETF stands for exchange traded fund. Which means you start a fund (have a pool of money) and tell the investors broad rules what you are going to do with capital and then a unit of that fund is traded on exchange like NSE/BSE. That is why they are called ETF.
Now as the name suggests PSU Bank Bees ETF means an exchange traded fund which puts money in PSU Banks.
We are talking about this ETF because PSUs are hard to differentiate barring the bigger ones. Smaller ones give big moves but are hard to figure out to raise the comfort level. That is why this ETF can help us if we are taking a big picture move call.
| Company | Asset % |
| State Bank of India | 31.67 |
| Bank of Baroda | 15.30 |
| Punjab National Bank | 14.68 |
| Canara Bank | 14.20 |
| Bank of India | 5.64 |
| Union Bank of India | 5.43 |
| Indian Bank | 3.50 |
| Indian Overseas Bank | 2.23 |
| Central Bank of India | 2.13 |
| Bank of Maharashtra | 2.10 |
| UCO Bank | 1.57 |
| J&K Bank | 1.26 |
How to read that table?
Say you are putting ₹100 in this ETF then ₹31.67 of that will go to SBI, ₹15.30 in Bank of Baroda, ₹14.68 and so on.
Basically you will be saved from going through the haystack to find the gold pin and you are just buying the whole haystack because you know it is highly likely pin is in this pile.
That is about ETF and why we are approaching it this way. If you have more questions you can ask in comment section.
Let’s get back to price action again. There was a good resistance around 22 that has now turned into support according to law of polarity.
Why do we like PSU Banks –
- Structural shift in government thinking about economy and business ownership.
- Privatization of few PSUs can be trigger.
- ETF is at support .
- 50 SMA is just touching it .
- Valuations are low and there is under ownership in this segment.
Institutional investors have started looking at PSUs positively and in our understanding this can not be some few days event which gets over soon as many value investors with 12% CAGR aim are portraying it as. Granted it won’t be straight line move either but when was the last time it happened in any stock either?
If you are in SBI/BOB and are happy then fine. Otherwise for easier management one could just get out of those two and get in here or even otherwise if you find the story behind the PSU Bank move compelling then you can have a look at it.
Looking good in the zone of 22.5 – 24.5 with SL of 21.99 on closing basis. Do not hurry here and this trade by definition can not be rockets. But over the period without you realizing it can give significant returns.
Let us know your thoughts in comment section.
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