SBI, BoB: After stellar rally, can PSU banks still offer good returns?

If the stock of SBI fails to conquer the resistance of Rs 425-mark, some weakness is likely near the support of Rs 410 levels

Financial sector stocks, especially the public banks, have been on a gradual upward trend during the month of June. Privatisation buzz, strong earnings and fund-raising plans have lent confidence to investors which resulted in buying in these names. The stocks did see some weakness recently but the positive sentiment remains intact, charts show.

Union Bank shares, for instance, have gained over 12 per cent so far in June while UCO Bank has surged 5 per cent. Notably, Union Bank, said on Thursday, it has raised Rs 850 crore while UCO Bank has received Board's nod to raise up to Rs 500 crore.

Meanwhile, other stocks in the PSU bank basket like Central Bank of India and Indian Overseas Bank have seen a sharp rise on the news of divestment plans.

Even today, the momentum in the PSU banking space remained strong even as the benchmark indices languished near the flatline. The Nifty PSU Bank index jumped 2.50 per cent in the intra-day trade, with most stocks up in the range of 1-6 per cent as against a 0.25 per cent gain in the Nifty50.

The question although remains whether PSU Bank stocks can continue to draw investor interest? Here is their outlook on the technical charts:

NIFTY PSU BANK

Outlook: Needs to cross the resistance of 2,250 to breakout on upside

After a decent reversal in the month of May 2021, the index is currently witnessing a hurdle near 2,550 levels. The Relative Strength Index (RSI) is in the overbought territory around this hurdle, suggesting selling pressure. Going forward, till the index doesn't conquer this resistance mark, the upside bias will remain capped. However, the downside support range falls at 2,250- 2,300 and till it defends this range, any major weakness is immaterial, as per the daily chart. CLICK HERE FOR THE CHART
 
Union Bank (UNIONBANK)

Likely target: Rs 44 and Rs 47

Upside potential: 15% and 20%

The stock is indicating a sideways or consolidation breakout above Rs 39 levels. The up move is heading towards Rs 44 and Rs 47 levels from a medium-term perspective. On the downside, the closing basis support of Rs 36 and Rs 38 stay firm and the current momentum shows retesting of these levels. The volumes on the breakout have seen increased strength which are suggestive of the positive interest of market participants. CLICK HERE FOR THE CHART
 
UCO Bank (UCOBANK)

Likely target: Rs 16 and Rs 18

Upside potential: 17% and 24%

The stock is moving in the "Higher High, Higher Low" pattern after breaking out of the "Double Bottom" pattern, as per the daily chart. Although, the current scenario hints at mild profit booking around Rs 15 levels, the upside bias is firm with the support at Rs 13 and may reverse towards Rs 16 and Rs 18 levels. The 50-day moving average (DMA) is in the process of making a Golden Cross with 200-DMA. If that happens, the positive sentiment may result in a firm upward trend. CLICK HERE FOR THE CHART
 
State Bank of India (SBIN)

Likely target: Rs 440 and Rs 447 (after crossing Rs 425 firmly)

Upside potential: 3.50% and 5%

If the stock is able to conquer the trendline resistance of Rs 425, the breakout may see a rally towards Rs 440 and Rs 447 mark. On the downside, it has support at Rs 410, which needs to be held on the closing basis, as per the daily chart. If the stock fails to conquer the Rs 425 mark, some weakness is likely near the support of Rs 410 levels. CLICK HERE FOR THE CHART
 
Bank of Baroda (BANKBARODA)

Likely target: Rs 90 and Rs 94 (A decisive breakout above Rs 85 )

Upside potential: 5% and 10%

Although the current momentum shows weakness around Rs 85 levels, the underneath price action is in the favor of upward bias. In the last 15 sessions, the stock has gone sideways and continues to maintain support levels firmly. Now, until a decisive breach below Rs 78 does not emerge, the upside bias is anticipated to observe a bullish sentiment, suggests daily chart. A breakout above Rs 85 may see the stock trend higher towards Rs 90 and Rs 94 levels. CLICK HERE FOR THE CHART