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Shares of metal companies and public sector undertaking (PSU) banks were under pressure on Tuesday with most of the stocks from these sectors hitting their 52-week lows on the National Stock Exchange (NSE) during intra-day trade.
Tata Steel, Hindalco Industries, JSW Steel and Steel Authority of India (SAIL) from the metal pack and Bank of Baroda, Dena Bank, Oriental Bank of Commerce, Punjab National Bank, UCO Bank and Vijaya Bank from the PSU banking space touched their respective 52-week lows. However, at the end of the day, most of the banking stocks closed higher between one and three per cent.
CNX PSU Bank index that hit a fresh 52-week low of 3,102 in intra-day trade, finally ended 1.5 per cent higher at 3,168 levels. CNX Metal Index, too, touched a 52-week low of 2,224 and ended the day at 2,239 levels, 0.22 per cent higher than its previous close.
Says Kunal Bothra, head of advisory at LKP Securities: “The PSU banking pack has been under pressure. I think this pain will go on and the stocks will continue to languish. The recent results have not been too encouraging and then there is the NPA (non-performing assets) overhang as well. This will continue for at least two quarters for the PSU banks with mid-cap PSU banks suffering the most. Bank of India, Andhra Bank, Allahabad Bank are a few such banks that will face challenging times ahead.”
So far in the current calendar year (2015), the CNX PSU Bank index has slipped 26 per cent, while the CNX Metal index has dipped 16 per cent compared to a 2.8 per cent fall in the CNX Nifty. “While banking as a sector had come under pressure, the private sector banks which we have been recommending had had a relatively better period and has outperformed. We continue to believe that structurally, it is the private sector banks which will give a sustained out performance and at best most of the PSU banks will be trading play. Our preferred picks among the private banks continue to be HDFC Bank, YES Bank, ICICI Bank; and State Bank of India (SBI) among the PSU banks,” says R Sreesankar, head of institutional equities at Prabhudas Lilladher in a recent report.
On metal stocks, Deven Choksey, managing director and chief executive of K R Choksey Securities, feels there is more pain in store for investors going ahead. “In my opinion, oil prices are showing signs of a possible crack. Once oil prices dip, metal prices will go down at a faster pace. As a result, a number of metal stocks are showing weakness. There is more pain in store for investors here,” he says.
Angel Commodities expect base metal prices to trade lower as Chinese demand has failed to pick up yet despite stimulus measures by the biggest consumer.
“Manufacturing activity in China shrank for the third straight month in May as demand remained soft, raising the chances of more stimulus to boost growth in the biggest consumer. Fears of a rate hike by the Federal Open Market Committee in 2015 along with persistent uncertainty over Greece will take a toll on prices of base metals,” Kaynat Chainwala, an analyst tracking non–agri commodities and currencies at Angel Broking, said in a recent report.
