Trend reversal in PSU BANK index after the ADANI Impact ?
PSU banks are government-owned banks in India that play a significant role in the country’s banking sector, serving as the backbone of the Indian economy. The PSU Bank Index is a crucial indicator that measures the performance of the public sector undertaking (PSU) banks in the economy. NIFTY PSU Bank is the PSU BANK INDEX in India. Nifty PSU bank index is trading at a value of 3804.75 as on 16th April 2023.
The PSU Bank Index is typically calculated using a weighted average of the stock prices of PSU banks listed on a stock exchange. The heavy weights in the PSU bank index are SBIN (state bank of India ) with an index weightage of 76.4 % , followed by Bank of Baroda (BOB) with an index weightage of 5.6% , followed by Canara Bank Ltd with an index weightage of 5.5 % followed by Punjab National Bank (PNB) and Union Bank of India with index weightages of 4.8% and 2.1% respectively. The weightage of each bank’s stock is usually based on factors such as its market capitalization or free float market capitalization. The PSU bank index can be considered as an economic indicator of public sector bank sector of the country. To ensure that the PSU Bank index is often reviewed periodically to ensure that it reflects the changing dynamics of the banking industry and remains relevant as a benchmark.
BEST PRICE LEVEL TO CONSIDER INVESTING IN PSU BANK BEES
The best instrument we have to invest directly in PSU bank index is PSUBANK bees. PSU bank bees is an exchange traded fund (ETF) that tracks the PSU banking index. PSU bank bees is trading at a value of 43.82 as on 20th April 2023 whereas NIFTY PSU BANK index is trading at 3873.5. We can consider Adding PSU BANK BEES to our portfolio for long term investment at a value below 40.
Public Sector Undertaking (PSU) Bank Exchange Traded Fund (ETF), commonly known as PSU Bank Bees, is an investment product that offers investors an opportunity to invest in a diversified portfolio of stocks of public sector banks in India. It is listed and traded on the National Stock Exchange of India Limited (NSE) and the Bombay Stock Exchange Limited (BSE). In this report, we will analyze the performance of PSU Bank Bees, taking into consideration various performance indicators, risks, and challenges associated with investing in this ETF. PSU Bank Bees invests in a diversified portfolio of public sector bank stocks, with the portfolio composition based on the Nifty PSU Bank Index. The portfolio is reconstituted and rebalanced periodically to reflect changes in the index. The performance of PSU Bank Bees is closely linked to the performance of the underlying index, which in turn depends on the performance of the individual bank stocks in the portfolio.
NIFTY PSU BANK HISTORICAL RETURNS
| Year | Open | High | Low | Close | Returns |
| 01-01-2017 | 3007.2 | 4335.2 | 2890.9 | 3700.55 | (+24.1%) |
| 01-01-2018 | 3717.4 | 4009.75 | 2564.5 | 3088 | (-16.55%) |
| 01-01-2019 | 3105 | 3492.7 | 2113.05 | 2524.35 | (-18.25%) |
| 01-01-2020 | 2531.4 | 2582.7 | 1078.45 | 1752.7 | (-30.57%) |
| 01-01-2021 | 1758.4 | 3054.75 | 1740.2 | 2530.4 | (+44.37%) |
| 01-01-2022 | 2530.85 | 4617.4 | 2283.85 | 4318.55 | (+70.67%) |
HOW ADANI GROUP CONTROVERSY AFFECTS INDIAN BANKING SECTOR
The Adani Group, led by Gautam Adani, has been in the spotlight recently due to allegations of financial irregularities and scams. These allegations have raised concerns about the potential impact of the Adani Group scam on the Indian banking sector, which plays a critical role in India’s economy. The top public sector banks in India has an exposure to Adani group worth 50,000 crores. The major heavyweight of the PSU banking index State bank of India(SBIN) has an exposure of ₹27,000 crore towards the Adani group. State bank of India (SBIN) has highest exposure as compared to other banks . Other major banks which have higher exposure are (BOB) Bank of Baroda while have exposures of ₹5,380 crore and Punjab National Bank (PNB) has exposure of ₹7,000 crore.
The Adani Group scam can pose significant risks and challenges to the Indian banking sector. One of the major risks is the potential for increased Non-Performing Assets (NPAs) for banks. State bank of India has fallen 20% from the recent swing high because of the Adani impact and is now heading for a recovery. SBIN is trading at a value of 540.75 as on 21st April 2023 . If the Adani Group’s companies default on their debt obligations, which they have reportedly taken on significant debt to fund their expansion plans, it could result in increased NPAs for the banks that have lent to them. This could weaken the financial health of banks and impact their profitability and stability.
Another challenge is the potential reputational risk for the banking sector. The Adani Group scam has attracted widespread attention and negative publicity, which could erode the trust and confidence that customers and investors have in the banking sector. This could result in reduced deposits, withdrawals, or investments in banks, and have a long-term impact on their reputation and business operations.
