It seemed that markets were hell bent on proving me wrong. 🙂
And if you include dividends, it touches almost 29%. And this is against Nifty’s return of 15.8%. And here we are talking about big, country-wide banks and not small cap stocks.
|Note – Returns based on prices upto 14th-May-2014|
But before you put your money in PSU banks, please remember that on the business front, almost nothing has changed for these banks. Its only because of the so-called-hope, that these stocks have charged ahead. But having said that, prices these shares were trading sometime back were ridiculously low compared to historical valuations. And because expectation from this portfolio is to give better returns than index in next 5 years, this current out-performance should be taken as an exception and not as a rule.
But there are two simple yet important observations which I would like to highlight here:
- Sometime in January 2014, concerns about asset quality were getting a lot of media attention & hence stocks of these banks reached almost absurd levels of undervaluation. But when the markets turned euphoric due to elections, it was the group of larger banks (SBI, BOB, PNB, etc) that bounced higher than smaller ones (Syndicate, Allahabad, Andhra, etc). This came as a surprise as I expected smaller ones to be more volatile and prone to movement due to market noises (even though asset quality of these smaller ones pose a bigger question than that of larger ones.)
- Another interesting fact is that this Portfolio of government owned PSU banks is quite a volatile one. And as you can see in table below, quarter-on-quarter portfolio returns have fluctuated from -14% to +47% over the last 6 months. And that is a very high level of volatility. So, those who have difficulty sleeping at night due to stock markets, please avoid this group of stocks 🙂
|A screenshot from previous post dated 15-Feb-2014|
|Detailed PSU Banks Tracker Portfolio – Quarter 1 Update|
|Nifty Stocks: One Year Returns (Dec 2011 – Dec 2012)|