Oil marketing companies are in a sense comparable to PSU banks. We have a lot of negative news so far, crude prices are rising. They have not taken commensurate increase in their product prices so far. That is why their margins are getting squeezed.
If over the next few days, they either raise product prices or getting an excise duty cut, then probably they will be back on track. OMCs, also having fallen quite sharply over the last few weeks, are due for an upward bounce. In case, crude continues its uptrend and we do not find any solution to this situation, either by capping the realisation or by cutting excise duty, then probably they will resume their downtrend but till that time, for the next couple of days, OMCs could show an upward bounce.
What are your inferences from SBI’s earnings? We were also discussing the fact that with this whole NCLT process gaining momentum, there could be more respite in the works for the bad loans sitting on the books of these state-run banks?
Although I did not have a very detailed look at the numbers, but prima facie there was an increase in the NPAs in terms of percentages and high slippage numbers. The numbers are quite okay. As you said, the NCLT resolution has started with a very big case already decided and other two or three are about to get pass through. Basically, we think for PSUs this could be a good development as far as the NCLT or IBC resolution is concerned.
Temporarily, the PSU banking space could have bottomed out but final bottoming out will still depend on whether any new NPAs can emerge out of the economic situation that we are in and will be in for the next one or two quarters. So, fresh emergence of NPAs will have to be tracked very closely. It is more or less under control for the larger PSU banks. For the small and midcap PSU banks, we are still not out of the trouble.
Even though nobody likes PSU banks, but the strange part is that the stocks of Union Bank, Canara Bank and SBI have gone up, despite not coming out with a great set of numbers?
SBI is a leader. SBI, BoB, PNB. PNB disappointed a couple of weeks back and it is on the way up. As for SBI, if the street is generally happy with the outcome, then the other PSU banks stocks will initially follow SBI and may be after a couple of sessions, the weaker ones will fall back and resume their original trajectory. But at least for today and may be tomorrow, all the PSU banks probably will show an upward correction.