PSU Banks:II

Don't rush in to buy bank stocks now unless we see stability in trading price. The prices have fallen so steeply that, even if you buy 10-15% higher from their current lows, you will still land up as a major beneficiary from the point of view of dividend yield & capital appreciation. RBI has given stiff warning to banks to come clean of NPA's and restructured assets by March 2017 and lot of skeletons are still to come out of the cupboard. *At the moment,focus on coming out of weak stocks and stay in cash**.* Opportunities will come galore 4-6 months down.

Even an excellent Budget 2017 can't help if China goes in for a second round of devaluation and US data is still running weak.  Looks like a major global economic downturn is in the offing and India cannot be an exception to this. Also, much hinges on the monsoons for India and a third drought in a row can be catastrophic to all our well laid out plans. RBI will then have to launch fire-fighting measures on two fronts -- the Indian currency (which is at 29 month low ) and inflation - majorly retail & food items, apart from chasing the banks on the NPA front. Hope Dr. Rajan gets an extension and Modi & Jaitley will have the sense to retain him.

Experience & age is on his side. More politics can be damaging to the economy. Enough of the plunder of banks during UPA I & II which is mainly responsible for the indiscriminate lending by banks to industrialists/politicians, waiver of farm loans etc. which resulted in skyrocketing of land & other asset class (including prices of stocks through the PN route).

Coming to specifics,

Canara Bank has been mauled very badly & is at a multi-year low and the way it has fallen (from a high of Rs.500) it looks like it is wilting down to Rs.140 - the price last seen in 2004.

The trading history of IDFC Bank is very limited -- about 3-4 months old. But the way bank shares are correcting, you may get the share at Rs.35 or even below