Shares of PSU banks have been bleeding for some time now. And unfortunately, some time back I had created a portfolio for tracking PSU banking stocks for next 5 years. Though it has only been 3 months, the fact is that the news is not good. 🙁
The portfolio is down 11.90% compared to Nifty’s 1.5% loss. And if you remove the contribution of dividends, then it further goes down to 13.90%. Pretty bad for 3 months… Isn’t it?
But lets remind ourselves of our original expectation from this portfolio
“[We] expect these stocks to collectively give better returns than index (Nifty50) in next 5 years.”
And with this being the first quarterly update, we still have 19 more quarter to look forward to. As we all know, asset quality issues and competition from more efficient private banks still remain. But the journey has just started. A snapshot of the portfolio is given below:
In case you want to get more details, please click on the image below to enlarge:
|Detailed PSU Banks Tracker Portfolio – Quarter 1 Update|
Please note that I am separately tracking dividends as these government entities are quite liberal in doling out dividends to their shareholders (read: government), and hence we cannot neglect the contribution of dividends in this portfolio.
One of Stable Investor’s loyal readers Subhodeep made an interesting point in the earlier post:
“Some PSU Banks may yield progressively more than their own FDs over next 5-10 years. In other words, for someone looking for supplementing his monthly income, it might be better to buy stocks, which might end up yielding eventually 15% (on initial cost) or so in next 10 years, instead of buying a 5 or 10 year monthly income certificate (8% or 9% taxable return) in the same PSU Bank.”
And this yield on cost makes quite a lot of sense. I personally know people who now earn yields in excess of 600% every year (on-cost) on their investments made almost two decades back!!
But lets go back to banking sector for now. 🙂 March 2014 is almost here and pretty soon, its possible that there might be some important announcement about new banking licenses. So, it is once again possible that few of the PSU banking names may see a volatile quarter of price movements.
But already down close to 15%, these stocks look quite attractive for long term. What do you say? Do you think these stocks would make more money than index in next five years? Or we are not going to see these stocks make new life time highs in next 5 to 10 years?
Do share your views.