Donald Trump’s victory hasn’t exactly sent Indian investors into a happy dance.
The market bears have kept Indian stocks on a short leash, letting them stretch just long enough for a quick bull run before yanking them back into the doldrums. But hey, don’t hit snooze just yet – there’s gold buried in the gloom.
MONIIFY has found something for y’all: state-owned banks. Hold your yawns. Sure, these banks aren’t exactly glamorous, but there’s a lot more to their stocks than meets the eye.
While most of the market has been trudging along, state-owned banks have flexed hard with a 22% boost in profits for the financial year ending March, while the rest of the Nifty has reported a bang average 12%.
- State Bank of India, Punjab National Bank, Canara Bank and Bank of Baroda are the standouts among the 12-member Nifty banks gauge.
- Indian banks are sitting at a modest price-to-earnings ratio of 13.7 times, way below the Nifty 50s’ 26. Translation: these stocks are seriously undervalued.
- Despite a 17% rise this year, they’ve trailed the Nifty 50’s 24% gain over the past one year, which suggests these banks are yet to catch the rally fever.
No drama, but more problems
India’s state-owned banks have been through the wringer from 2018 to 2022: bad loans, scams and write-offs galore.
But the government’s rescue mission seems to be paying off. These banks have also cleaned up their balance sheets, slashing bad debt, and boosting their net income in the latest quarter. They are raking it in by lending cash to folks eager to spend before they earn. India’s middle class is thriving and spending has outpaced income growth, case in point: a whopping $17 billion were splurged on overseas travel this year, up 25%.
Add a rate cut that is likely on the horizon, and these banks could be about to cash in on a lending boom. In a nutshell, India’s state-owned banks are primed to pay off. 🤑
The one thing cramping these old-school banks? Fintech.
Indians are making nearly all small payments through UPI, a lightning-fast, free payment system that’s brought fintechs like PhonePe and Google Pay the lion’s share of the payments market.
With the central bank slowly greenlighting larger payments on UPI, the game’s threatening to shift away from the old guard. Suddenly, they’re not the only show in town – and their starring role could just be written out.
