PSU bank stock is set to rally up to 50%

bank stocks had a stupendous run in 2022 and have even outperformed their private sector peers by a healthy margin. One stock within this pack that has grabbed eyeballs is Punjab National Bank NSE (2.80 %.)

The stock has net gained about 50% year-to-date, outperforming sector bellwether State Bank of India NSE (00.81 %) which has risen about 32%.

Foreign investors, mutual funds and institutional investors have steadily increased their holding in the lender on the back of improving financials and the strong outlook for credit growth for the banking sector.

From just about a percent in December 2020, the total holdings of mutual funds in the state-owned lender went up to( 3.6%) in the September quarter.

The strong interest in the stock from big sharks of the market is visible in the derivatives segment of late.

Punjab National Bank has been under ban in the futures and options segment, because the market-wide position limit has crossed 95%.

.As on Wednesday, the open interest in the December futures contract of the stock stood at 22.47 crore.

“The scrip usually enters the ban period every now and then….which reflects on the fact that the stock is always the big pocket favorite,” said Shilpa Rout, lead derivative analyst at Prabhudas Lilladher. “So strong buildup in OI (open interest) is never something to be surprised about.

The stock has risen more than 20% alone in November, and extending the gains to December, it hit a 34-month high of Rs 57.35 on Tuesday.

MORE STREAM???

The stellar gains notwithstanding, analysts see more legs to this up move and anticipate at least 50% more upside for the stock from the current levels.

“PNB managed to give a breakout of two-year consolidation on the monthly chart. The stock is now trading above all its important moving averages, indicating bullishness ahead,” said Rajesh Palviya, vice president – technical and derivative research at Axis Securities.

Expecting the upward momentum to continue, Palviya sees PNB/NSE (2.80 %) stock scaling towards Rs 65-80.

According to him, Rs 80 will act as a crucial make-or-break level for the stock, because if this is breached, it can see a swift run up to Rs 94-95 levels. Rout of Prabhudas Lilladher is equally bullish on the stock, and has a medium-term target of Rs 61-64, with positional target of Rs 80-85.

Positioning in the options of the stock too, suggest that Rs 60-61 will be a crucial level to watch out, as call options of these strike prices hold very high open interest.

 

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