Momentum Pick – Bank of Baroda outperforms Sensex, returns 130% in 1 yr; analysts give technical & fundamental views, outlook

PSU Banks have shed some underperformance in October Series and are now in flavour. While, State Bank of India (SBI), Panjab National Bank (PNB), Canara Bank and Bank of Baroda (BoB) have been on a winning trend, analysts pick BoB as Momentum Pick for today. The 1-year returns given by this stock is almost 130 per cent as against 50.03 per cent returned by the BSE Sensex

In the Year-to-Date (YTD) basis, this state-run bank has given over 61.54 per cent returns, outperforming the Sensex by almost 33 per cent. Source: PTI

The PSU Bank have shed some underperformance in October Series and are now in flavour. While, State Bank of India (SBI), Panjab National Bank (PNB), Canara Bank and Bank of Baroda (BoB) have been on a winning trend, analysts pick BoB as Momentum Pick for today. The 1-year returns given by this stock is almost 130 per cent as against 50.03 per cent returned by the BSE Sensex.

In the Year-to-Date (YTD) basis, this state-run bank has given over 61.54 per cent returns, outperforming the Sensex by almost 33 per cent.

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The BoB shares were trading at ended at Rs 99.40 on the BSE, up by 5 per cent or Rs 4.70 from the Friday closing price. The day’s high was Rs 100.20 which was also its 52-week high. The stock outperformed the sector by 2.44 per cent in the intraday trade.

It has risen over 5 per cent in the last two trading sessions and was trading above its 5-day, 20-day, 50-day, 100-day and 200-day moving averages.

Contrast this with its 3-year and 5-year returns which are 0.76 per cent and negative 36.66 per cent.

Experts View – Fundamental View

Tradeswift Director Sandeep Jain is bullish on PSU Bank stocks and said that markets have broken away from the notion that only the private banks will be playing a decisive role in the stock market movement. Bank of Baroda is the third largest public sector bank and is looking well to see an upside from here.

Jain said that Government’s intention to retain 5-6 large public sector banks while merging smaller ones into bigger ones is a step that augurs well for the public sector banks. The BoB stock is inspiring a lot of confidence, he added.

In terms of valuations, the stock is cheap, he further said.

He recommends a buy for a target price of Rs 110 in the immediate term. The stock has a strong support between Rs 85 and 90, Jain said.

The BoB share is trading at a Price to Earnings (PE) ratio of 16.42 with a price-to-book value at 0.61.

The stock has seen growth in quarterly profits with increasing profit margins as per Edelweiss.

It has a zero promoter’s pledge with promoter holding over 63 per cent. The Foreign Portfolio Investors (FIIs) have 7.82 per cent holding and retail investors’ holding is 10.4 per cent.

The company will be announcing its results on 29 October and is expected to report 8.4 per cent Year-on-Year (YoY) jump in its Net Interest Income (NII) at Rs 8141.10 cr as per estimates by Yes Securities.

Net profit is expected at Rs 1913.8 cr, a 14 per cent YoY and 58 per cent Quarter-on-Quarter (QoQ) jump.

Technical View

Analyst Nilesh Jain has recommended this stock many times on previous occasions. Today, it has met its previous targets of Rs 95 and Rs 100. He revises his target to Rs 110 with a 7-10-day view.

The stock has seen a triangle formation breakout on a weekly chart, Jain said. He is Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking.

Buy on dips is advised in this stock with a stop loss of Rs 87. The current valuations look attractive, the AVP added.

The Relative Strength Index (RSI) at 70.70 suggests the stock is currently overbought as per Edelweiss. RSI which is an indicator of stock momentum indicates overbought/ oversold above 70.

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