PSU Banks have gained tremendously in the last 1 year.
The numbers are very impressive.
5 of these banks have made gains of more than 100% in the last 365 days.
Great going, one would think.
Probably, few investors made some money out of these stocks.
Does the current move make these stocks a good investment.
Recapitalization Money Down The Drain:
There was a big infusion of funds announced by Mr. Arun Jaitley, the then Finance Minister on October 24, 2017.
Stock prices shot up next day as can be seen from the chart below.
Then there was another recapitalization announced by Ms. Nirmala Seetharaman on August 30, 2019.
With so much money poured into these banks and with the 62% gain i the PSU BANK index, the overall position remains dismal when we compare with the prices on October 24, 2017.
That was the day when the Government decided to waste the tax payers money for revival of these banks.
Throwing good money after bad is a luxury only governments can afford.
Poor shareholders have this chart to show for their faith in these stocks:
Only 2 out of 12 stocks have given positive returns in this period.
NIFTY, the benchmark index has moved up 53.70% while some of these stocks have lost 60-70% value.
Why should one believe that they will get better?
They could not get better in 44 months while the market was doing well. There is no chance that they will perform better if the market corrects from here.
Even otherwise, these stocks are bad investments because they are not able to keep pace with the market.
Avoid PSU Banks.
I close my argument.
Readers comments are welcome.