Smart Talk: Not the end of rally in all PSU bank stocks, says this fund manager

NEW DELHI: PSU bank stocks turned out to be the worst performer this week with the Nifty PSU Bank Index losing 10.3%. Mohit Nigam, Fund Manager and Head – PMS, Hem Securities, was of the opinion that this might not be the end of the rally for all PSU bank stocks. “A few stocks with reasonable positives can be added on further dips. Investors should look at stocks which have sound asset quality and have further scope for growth,” he said. Edited excerpts:

Given the 2.5% drop seen in Nifty this week, do you still have hopes of any Santa Rally in the last week of 2022?
Markets have been volatile this week due to rising Covid cases globally and expectations of rate hikes by the Bank of Japan. In the last 2 decades, the market has witnessed Santa Rally 85% of the time. It has been observed that markets remain in positive terrain in the last 5 trading sessions of December and the first 2 sessions of January. We expect the market to bounce back from current levels and good recovery is expected in the last week of December.

Nifty Bank slipped below the 42,000 mark. What are the key levels to watch out for the coming week?
Nifty Bank closed with a loss of 1.75% at the level of 41,668. Seeing the current market scenario and that Covid cases surging again, we think the crucial levels for Nifty Bank can be 40,800 and 42,650 as support and resistance, respectively.

PSU bank stocks have been on a downhill path. Stocks like Punjab and Sind Bank, Central Bank of India fell over 20% each in the week. Is this the end of the rally?
Most PSU banks had priced in the major positives and hence have corrected quite steeply after the sharp rally. Many of them are around their 50% retracement levels. However, for some PSU banks, this might not be the end of the rally, and a few stocks with reasonable positives can be added on further dips. Investors should look at stocks which have sound asset quality and have further scope for growth.

Do the technicals indicate a further upside in pharma stocks amid rising fears of Covid?
Pharma stocks are underperforming the market in the last few months. Most of the stocks are in consolidation. Nifty Pharma is currently trading at 12,875 level, which is near to its 200-DMA levels. If it closes above 200 DMA on the weekly chart, it will give further upside of 5% from current levels. The rising fear of Covid stock directly related to Covid drugs had started showing momentum in the last few sessions. We can see further upside on some stock-specific in the pharma sector.

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