Banking not a defensive sector

CNBC-TV18’s Executive Editor, Udayan Mukherjee - The trading bounce in PSU banking stocks will be very strong and relief rallies look very good. You have had one relief rally for the banks, a couple of months back it looked very good. But I don’t think pharma and banking are in the same kettle right now, not in the same league at all. So it would be quite surprising despite this pullback if any of the PSU banks went anywhere close to their highs. But can they give you more of a trading pop from here, I think they can and probably will because they have got hit quite hard. They have all rallied about 15 odd percent from their recent lows.
 
If you look at the highs and compare it with where they are now, Rs 450 was the Bank of India high and the stock despite the pullback is only clawed back to Rs 280. You look at State Bank of India (SBI), Rs 2,400 was the peak despite the move of the last couple of days, the stock has only got back to Rs 1,400, thousand rupees lower than its peak for 2008.

You look at a Bank of Baroda, Rs 470 was the peak, the stock despite rallying 10-15% has got back only to Rs 250. Allahabad Bank is at Rs 70 now and Rs 130 was the high. So even if they rally 10-15% it would still be relief rallies and they are not going back in the near-term to anywhere close to their highs. The environment is very important now. I don’t think banks are very defensive sector at this point. The inflation story is not dead, crude is not dead yet, interest rates are still going up. It’s not a great environment for great outperformance for banks. But they were oversold and the pullback will be quite vicious as well.
 
You need to trade these banks for more gains over the next few days for sure but also just keep in mind that they are probably yet not a market-leading group. They have got serious headwinds and you will also need to know when to get off or step off the footboard in case you are playing this trading rally.