The market is likely to remain volatile in the near term, and investors should be cautious while picking stocks amid the volatility, according to experts.
In a recent report, brokerage house KRChoksey stated that the State Bank of India SBIN is best positioned to capture growth opportunities. The stock has a 'Buy' rating with a target price of 617 per share.
The scrip has jumped around 92 per cent to Rs 477 on December 6 from its 52 week low of Rs 248.15. With a market cap of more than Rs 4,14, 000 crore, the shares have a market value of more than 100 day and 200 day moving averages but are lower than 5 day, 20 day and 50 day moving averages.
The asset quality of SBIN has steadily improved over the years, according to the report by KRChoksey. In Q2 FY22, slippages fell sharply due to strong recoveries and upgrades. This is expected to continue in the coming years, with a declining trajectory in credit costs. The bank is well-capitalized to withstand any additional risk on its portfolio due to uncertain circumstances.
It added that the country's largest lender by assets is currently trading at a P B of 1.5 x 1.3 x 1.1 x for FY 22 E FY 23 E FY 24 E book value. The bank's ABV of 376 is 1.4 x FY 24 E P ABV, which takes the SOTP value to 617 per share.
Savings account deposits are a focus of the lowest cost of funds compared to its peers. The bank has tight control over its operating costs and maintained its efficiency ratios compared to its peers. KRChoksey said that it is focused on reducing the C I ratio to 50% by growing its topline rather than declining costs.
SBI is one of the preferred picks in the banking sector. According to Kranthi Bathini, equity strategist at WealthMills Securities, said that investors can buy the stock at every dip in a staggered manner given the current market scenario.
SBI reported a 66.7 per cent year-on-year YoY and 17.26 per cent quarter-on-quarter QoQ growth in net profit at Rs 7,627 crore for the quarter ended September 30.
Net interest income NII was up 10.65 per cent YoY to Rs 31,184 crore. The domestic net interest margin increased 16 basis points YoY to 3.50 per cent.
The bank has signed an agreement with Adani Capital Private Ltd, Adani Capital, Adani Group, for co-lending to farmers for tractor and farm implements.
With this partnership, SBI would be able to target farmer customers in the interior of the country looking for adoption of farm mechanization to increase productivity of crops. SBI is looking at co-lending opportunities with multiple NBFCs for farm mechanization, warehouse receipt Finance, Farmer Producer Organizations FPOs, etc. The press release said that the credit flow was doubled for boosting the farmers' income.