Performance Report on our BANKING SECTOR BUY REPORT- Also more view on Market

Dear visitors,

This goes with our repeated recommendation on Banking Sector stocks rally, starting with aggressive and ironic satiring comments on operandi of market mis-understandings.

Click below link for looking our original report of April 2010-

http://www.meghainvestments.com/2010/04/banking-bulls-and-bull-market-biases.html

Click below to see our repeated recommendation on 31 May 2010-

http://www.meghainvestments.com/2010/05/research-that-is-out-of-question-follow.html

and, below at our FREESTOCKIDEA, free sms group, where we continually send sms for same,

http://smsgupshup.com/groups/freestockidea

and, continual enforcement of our view by putting the links prominently visible on top side home page.

BELOW IS THE TABLE SHOWING THE PRICE AS ON RECOMMENDATION DATE, PRICES AS ON CLOSING DATE, HIGH PRICEC SINCE, AND RETURN IN PERCENTAGE.

SR.	BANK STOCK NAME	rate on date of recommendation-30 april 2010 close	cmp-20 aug 2010 close	high made till date	Return IN % on 20 aug 2010 close price
1	SBI	2301	2783	2880	20.94741417
2	SBBJ	487.9	570.2	595	16.8682107
3	SB TRAVANCORE	642.1	750	769.8	16.8042361
4	YES BANK	285.6	331.5	344.6	16.07142857
5	SB MYSOR	666.2	920	1044.85	38.09666767
6	BOB	692.2	828.75	848	19.72695753
7	CORP.BANK	543.8	632	650	16.21919823
8	UNION BANK	311	361.7	367.95	16.3022508
9	VIJAYA BANK	53.65	84.15	87.85	56.8499534
10	BANK OF MAHA	55.4	72.75	74.4	31.31768953
11	CENTRAL BANK	161.3	184	196.2	14.07315561
12	UNITED BANK	83.55	101.7	107.8	21.72351885
13	BANK OF INDIA	380.8	457.8	476.4	20.22058824
14	BANK OF RAJASTHAN	76.7	207.3	213.5	170.273794
15	KARNATAKA BANK	137.8	176.35	188.8	27.97532656
16	SOUTH INDIAN BANK	173.8	208.45	213.4	19.93670886
17	PNB	1040	1187.5	1214.9	14.18269231
18	DHANLAXMI BANK	153	184.1	199.8	20.32679739
19	CITY UNION BANK	33.65	47.35	49.35	40.71322437
20	SYNDICATE BANK	93.25	118.3	123	26.86327078
21	IOB	96	136.15	137.15	41.82291667
22	OBC	353.8	444.65	448.5	25.67834935
23	FEDERAL BANK	292.6	354.2	357.35	21.05263158
24	ALLAHABAD BANK	164.6	211.1	220.8	28.25030377
25	ANDHRA BANK	132.3	161.8	166.8	22.29780801
26	INDIAN BANK	225.3	255.7	260	13.49312028
27	CANARA BANK	429.6	528.4	539.4	22.9981378
28	UCO BANK	69.2	113.9	117.2	64.59537572
29	DENA BANK	88.7	110.05	112.5	24.06989853
30	IDBI	126	131.75	133.85	4.563492063
31	J AND K BANK	756.2	886.35	924	17.21105528
32	KARUR VYSVA BANK	486	681.5	687	40.22633745
33	DCB	44.9	54.75	55.5	21.9376392
34	AXIS BANK	1270	1367	1397	7.637795276
35	KOTAK MAHINDRA BANK	738.5	862.7	869	16.81787407
36	ING VYSVA BANK	318.5	360.95	376.8	13.32810047
37	ICICI BANK	952	994	1016	4.411764706
38	HDFC BANK	2000	2231.3	2239.8	11.565
39	INDUSIND BANK	193.9	222.95	232.3	14.98194946

…………

We have received enormous number of emails throughout last one month and even more number of emails and phone calls during last two weeks. All inquiring about banking sector and banking stocks. We tried to respond all of them remaining in our limits of man hours and maintaining legitimacy with paid members.

AN ANALYSIS OF THE RISE AND RISE-

The average return turns out to be more than 26% for all 39 banking stocks for given period.

Bank of rajasthan with 170.27%, has the biggest run up, despite all the hurdles with ICICI bank taking it over.

Amongst the large cap front runners, Axis bank, after recommendation rose 7.63% only, as it has already witnessed run up before previous quarter excellent results. While same goes with HDFC bank (11.56%), and SBI (20.94%); SBI has a relatively better run up, mainly due to attractively valued associate banks. Because they are going to get merged just like bank of saurashtra sooner than later. Amongst the frontline PNB, one of the top lender in India also already had run up above 1000 mark, gave a decent return of 14.18%, obviously not bad in a quarter of duration. While Kotak Mahindra bank, which we believe to consider among frontline banks, is generating a business of over 3000 crore for last two consecutive years.  This is less than ICICI bank’s quarterly business of over Rs.5000 crore. Although we will only amazed if it do not cross the 1000 mark on its share price, especially given the foreign institutional interest and activity in taking stake in this bank. You will notice that even being top private bank ICICI has not performed comparatively. There can be few reasons, one is that it has already has a steep run up being an index constituent from 350-400 levels to 850-950 levels. Another is that is high capitalized in equity compared to peer like say SBI (half equity than that of ICICI). One more reason is the losses in international markets during and post US subprime crisis involvement and losses in Indian markets immediately then after due  to mis-lending in high-risk segments.  Keeping in mind all of this, we believe, any positive move, in terms of good earnings report, change in management, value unlocking , etc can possible bring big cheers to this stock and join the standing triple digit league of its likes of HDFC bank, PNB and so on. So it’s a good buy, but with a little bit of timing the entry.

The SBI associate bank stocks have mainly performed in last two weeks, i.e in month of August. We saw State bank of Mysor rising most since our Sector Recommendation on 29 April to date. It rose 38% to 750, while State bank of Bikaner and jaipur and state bank of trancore rose identically around 16%.

Amongst the new genre private banks, as we address them, Yes bank, and Indusind bank are a clear candidate of huge business growth in less than 3 years. Our friends in connection with top investors say they see another ICICI bank in Yes bank in next decade or a bit later. Nevertheless we believe it will become a takeover target, if it does not make others takeover target. However the new banking licence norms, and entry of new players will change the picture and spur huge restructuring in whole sector. Just like the Indira Gandhi nationalization in 1969, the next decade will see huge actions on ‘privatisation’ side (not privatization of PSU banks).

We are less bulish on canara bank, bank of india, while we see a clear speculative rally in united bank of india, the newest listed kid on the block. The second newest listed Central Bank, sources has it that some portfolio managers for rich are planning to put it in for next couple of years for a 100% return, citing a privately circulated report.

There are 16 bank stocks showing a run up of around 20%. While the number of bank stocks risen in range of 5-10% were 3 including frontlines Axis and ICICI bank. 7 banks gave return beyond 40%.

One noticeable thing was the number of stocks exactly giving return very close to 15%. They were 12 banks in this list. While IOB has recorded fresh highs recently last week. We will not call the rise of 41% in our table, a rise in that sense. Because it has been trading in a range of 90 to 115 for a good time of the year. So if it has to rise, it is going to rise significantly to call it genuinely ‘risen’ or the part of run up in the sector. Uco bank has seen huge run up from 70 levels to recent above 120 levels. Having close to 10k Rs. Business, this stock was the prime target of the previous bull market players and same for the latest up move in markets. Stocks like dhanlakshmi and city union bank are trading above only for reasons of expected m and a activity and ‘representative bias’. Talking about DCB, there is nothing fundamental about it, except tata group having significant stake in it. The bank has been in the business for a long while, as least earlier than yes bank, and indusind bank, but doing a meager topline of 500 crore. Most banks have atleast doubled revenues in last 5 yrs while this private player is standing at only some 30% rise in revenue during the period, that too on simple terms. Personally, there is nothing promosing in this bank fundamentally, at least as of now. But the prices may run up only because it has not yet! Yes bank and indusind bank are likely to remain the best outperformers amongst the private banks, while the likes of karur vysya, and ing vysya are likely to remain behind, but may show bigger spikes.

while the upside space in corporation bank from current 650 levels and in Union bank from current 360 levels seems more visible. One can trade and invest with more confidence. Union bank, uco bank, yes bank, indusind bank has been amongst our specific repeated recommendation on FREESTOCKIDEA group from respectively, 310, 85, 290, and 200 levels. Karnataka bank seems to have give a breakout and can rise to 220-250 in a 2-4 week. Traders can keep sl below 160.

More on other banks in later issue.

THE ENDORSEMENTS AND ENFORCEMENTS-

Recently we have been for last less than a month, seeing tv channels featuring ‘proper attention’ on banking outperformers, and ‘visible’ run up in this sector. Many analysts and fund managers started giving their comments on it.  

We have also been seeing research reports and brokerages coverage citing ‘psu banks trading below fair valuation’, ‘private banks-next growth driver’ and so on.  This should never meant to get oxyfied into euphoria.

ON BULL MARKETS:

We have repeatedly said,

Usually, a New bull market= old highs + new highs.

In fact I would go forward and say, the PRESENT RISING PRICES IS NOT A BULL MARKET BUT ONLY REFLECTION OF ROBUST AND RESILIENT FUNDAMENTALS OF INDIAN ECONOMY.

Words and use of it also play big game with all of us. For example, take the word ‘maharaj’. This word was used to address kings only. Now a days, a cook at your home is also called ‘maharaj’. See how the synonym for the ruler of a kingdom become a name for a servant making recipies in you house! The point is that the over-use of words like ‘bubble’, ‘bull-market’, bear-market’, ‘correction’, ‘panick’. Has resulted into mis-leading, mis-conceptions, mis-judgements, and mis-analysing of the markets and has proven/proving unseen damage to right understanding and efforts of right understanding of markets. The frequent use of word ‘bubble’ by a blue-channel report-cum-analyst, for realty sector in india, make us laugh. More so because of the glee face and tone of the person. We have seen USA blue-channels as well, they do not do such mistake, yes they use the words, but they do not try to do ‘acting’, and try to do ‘enforcement-action’. Any ways those poor fellows have also the never-ending job to ‘fill the air-time’. And have to do all those or any type of for that matter ‘bla-bla’…

We have also witnessed that a run up in prices and build up of bull market, begins with PE rerating. Players see a low PE stock and ramp it up. Gradually due to some or other reason one by one sector take attention. Such as the auto earlier and banking now. It is not incidental that several banking stocks are still around a PE of 10. Any good sector/company in India with good profitability, growth and so on is not unreasonable If is at PE of close to 20. But above it all is a No, No. just try to analyze companies like Karur vysya, ing vysya bank, and many other have never witnessed investor attention and interest. First you get interest attention and then investment.

          Another wisdom to carve on stone is ‘never think, not to buy some stock, just because it has run up a lot in short term, or it has given huge rise from your comparative base price’, similarly ‘never thik, to buy some stock, just because it has declined a lot and you ‘believe/assume’, there is less to lose from these levels’. Don’t let these no-thumb rule become tumb rule for your trading and investing activity. This behavior goes with bias of ‘over-simplification’ and ‘incomplete processing of information’. Who care to analyze the past and envision the future (hey! This ain’t the forward FY projections you get for all stocks in every next brokerage house report) with keeping in mind numbers, and analyzing prevailing traits of behavioural finance!

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Disclosure:
Our research team, family and members may hold one or more stocks.