But experts urge caution as privatization of banks doesn’t have too many precedents.
“Select low value public sector bank stocks are surging on expectations of privatisation after the announcement in the Union Budget,” said Deepak Jasani, head of retail research at HDFC Securities. “Until we see some roadmap of the process and identification of banks, one should be careful in getting excited about these stocks as operators could resort to ‘pump and dump’.”
Central Bank of India shares recorded trading volumes of Rs 19 crore on Wednesday and Rs 14 crore on Thursday. These compare with about Rs 40-45 lakh worth of usual transactions.
Independently, these banks may not be out of trouble in terms of their revenue growth and asset quality, prompting analysts to assess the reason behind the surge in interest and prices.
“One wonders about who all would be interested in buying out these banks and under what terms,” said Jasani.
BSE Bankex, a sector gauge, fell more than 2 percent since February 15. But, all these four stocks have surged in the range of 50-72 percent in just four trading sessions.
Bank of India shares exchanged hands resulting in total daily trades in the range of Rs 4.50-10.5 crore past two days. Those were thinly traded with daily volumes hovering around Rs 38-40 lakh per day on and before February 15.
Analysts say that
and BPCL might be among the first to be privatized. If these two do not happen in the next few months, the enthusiasm on PSU banks may not last. The government has clarified that it has not yet finalised the bank privatisation candidates.
“Speculative bets are fast rising amid hopes of privatisation,” said Ashutosh Mishra, banking analyst at Ashika Stock Broking. “Retail investors should remain cautious as the rumour mill is running fast. Liquidity of these stocks can pose a challenge at any time once the exuberance is over.”
Indian Overseas Bank too witnessed secondary market trades in the range of Rs 3-12 crore in past three days, multiple times higher than the usual volumes.