Can SBI cross its 320 Laxman Rekha? An Interesting Analysis

So, again we are here! The 320 level multi-year ‘around life-time high’ resistance for the largest public sector bank in India.

As you can clearly see in the monthly chart given SBI rallied above 320 in ‘the great’ banking bull run of 2009, 2010. Then it receded towards its 100 DMA and again rose above these 320 level in 2014-2015 market rally and yet again before the surprising stock market correction set in in August 2018, it tried to climb that level, however, in which, it failed this third time.

SBI monthly chart.

The banking sector benchmark index NIFTY BANK is at 30400 levels; its highest till date. This index has been outperforming to benchmark NIFTY, SENSEX and most other sectoral indices for many years, and to date as well.

While we can not give fundamental valuations for SBI as it does not have any PE etc. due obviously to losses and NPA mess over the past few years, we see this bank outperforming in a big way. If the private banks of the likes of ICICI Bank, Axis Bank, who are also in similar situation and commindg higher valuation with its shares making new highs, there are more than a couple arguments in favour of SBI.

India is very much behind in comparison in terms of market capitalisation. Within that also none of Indian bank lists in terms of market capitalisation compared to Chinese banks or other countries’ banks. We have to have at least 2-3 banks in that list and SBI can definitely contend. HDFC Bank market cap is 3 times that of SBI while it’s total liabilities are 3 times less than SBI. If governance is improved, SBI can do magic in terms of stock performance on the basis of its massive depositor base. I am also sure in coming 5 years, we will see government merging a couple banks into SBI.

Visit our site and join any service to get regular trading calls and investment ideas.