Time For Gov Owned Assets To Catch Fancy?


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.

CompanyAsset %
State Bank of India31.67
Bank of Baroda15.30
Punjab National Bank14.68
Canara Bank14.20
Bank of India5.64
Union Bank of India5.43
Indian Bank3.50
Indian Overseas Bank2.23
Central Bank of India2.13
Bank of Maharashtra2.10
UCO Bank1.57
J&K Bank1.26
Data as on closing of market on 28th Feb 2021

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.

Hope you are liking these new charts that we are putting out. As always you can click on them to zoom in.

Why do we like PSU Banks –

  1. Structural shift in government thinking about economy and business ownership.
  2. Privatization of few PSUs can be trigger.
  3. ETF is at support .
  4. 50 SMA is just touching it .
  5. 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.

Disclaimer: Posts on the platforms of BN are our perspective on the market. These are purely meant for learning purposes. The perspective provided should not be construed as investment advice or solicitation to trade. We may have positions in the stock mentioned. You agree to make no trade relying on the above contained information fully or partly. By using the content, you agree to these T&Cs.

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2 Replies to “Time For Gov Owned Assets To Catch Fancy?”

  1. How come you select ETFs this time? Is it because of you start taking position in individual stock, there will be too many and you don’t want to load up the portfolio with too many such stocks?
    Government has tried many things for many years like trying to sell Shipping Corporation but failed to do so, what makes you comfortable now that something serious is happening or is it just institutional investors growing interest that you see?
    How ETF is better than a MF-Direct plan?

  2. You are right if we go by individual stocks they will be too many so ETF. Government has failed in most things but here the spark in PSBs has been telling in Feb after budget and that shows some strong interest by Institutional investors which also hints at something big is in offing.

    Since do not want to confuse anyone, ETF looks better than MF – Direct plan. ETF is more like stock only for you as investor. We have thought about this long and hard for more than a month and now settled with ETF finally. Let’s see how it works out. Remember every trade that we take or not to take is experiment and we are just collecting data points to make things better in future.

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