Nifty PSU bank hits new 52-week high, IOB, UCO Bank, Central Bank lead the gains

Platinum Industries debuts with double-digit premium

The Nifty PSU bank index gained 2.4 percent to hit a new 52-week high of 7,312 on March 5, powered by gains in Indian Overseas Bank, UCO Bank, Central Bank and Punjab and Sind Bank. The 12-stock Bank Nifty  was up 0.5 percent at the day's high of 47,737.

Nifty PSU bank has surged more than 27 percent this year, so far, against a 1.4 percent decline in Bank Nifty.

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Analysts at Kotak Institutional Equities said the increasing comfort in outlook for asset quality and return ratios have driven PSU bank stocks sharply higher . They, however, warned that the valuations of most Tier-2 PSU bank stocks were converging closer to those of SBI, which traded at a premium for few years.

"While we earlier favoured holding these Tier-2 PSU bank stocks, given the anticipated asset-quality recovery, making an investment case for them is challenging unless we believe that Tier-2 banks would be able to deliver superior return ratios for a much longer period," the brokerage firm said.

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SBI, they added, has demonstrated better franchise than other PSU peers in terms of through-the-cycle credit cost, liability franchise, asset franchise as well as digital or echnological enhancements. Hence, Kotak analysts prefer SBI over other PSU banks.

Analysts at Elara Securities were bullish on state-owned banks, citing their robust financial performance, which has been supported by improving core performance and historically low credit cost. They preferred picks are SBI and Bank of Baroda.

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