Allahabad Bank can test Rs 170: Aashish Tater

Allahabad Bank can test Rs 170 in next six months time, says Aashish Tater, Head of Research, Fort Share Broking.

Tater told CNBC-TV18, "We have been maintaining that crude will fall to USD 86 per bbl. Then we had a call that now there is a chance that the palindrome effect of 56.65 on rupee dollar exchange will not be breached on spot basis and closing basis and we still maintain by the view and we feel the rupee dollar equation will go to Rs 50. If you ask anyone on the street they are bearish on rupee that it will go to Rs 60 but the actual problem has not come from our currency weakness, it’s just there is policy reform and there are certain issues on tax aspect where we feel there will be lot of development which will be positive for Indian rupee."
He further added, "This will change the entire game scenario from inflation perspective also with rupee stabilizing, crude going down and even the inflation basket because our team expects monsoon to be better, which will help inflation coming down further. There is another possible development that whenever there is a fall into the bond prices reverse trade happens. Now it will again reverse out and that will benefit PSU banks. There is also a possibility of a CRR cut before the policy meet because last time also RBI was liberal because of advance tax numbers. So if you club all this together we feel PSU banks might come into momentum from short-term perspective."
"Allahabad Bank has been range bound and if one try to trade PSU banks like Allahabad Bank the best trade is when one buy a stock at a price to book value of 0.6 times and readjust with refinancing its actually available at 0.6-0.62 times forward and one should go and sell around 0.85 to 0.9 times price to book, which is roughly 25% upside from current levels."
"We have a target of close to Rs 170, which is almost 40% from current levels from next one year perspective because we feel now the interest rate cycle will benefit the PSU stocks and whatever refinancing that we have been talking about for almost last 6-8 months when we had a negative call is now getting neutralized because a large part of it has already been factored into the prices. So now when the things have been booked out, I do not see any reason that there will be even 10% fall from current levels on Allahabad Bank but there is a likely possibility that the stock would go and test Rs 155 and Rs 170 from next six months’ perspective and then eventually might trade at one time price to book of Rs 192 odd."
"So there is lot of upside left into these kinds of stocks but yet one have to be very specific and selective because there are certain PSU which we still do not like because of their extra exposure to sectors, which are under question. But we feel Allahabad Bank has bottomed out and we do not see more than 5-6% downside on to the stock but a potential upside of almost 40% from current levels. This is a definite bet from a medium-term perspective into the PSU space." Disclosure: I have no personal holdings in the above stock.