While there is no doubt that the banking space has played a key role in supporting the broader market sentiments for the last couple of months. The turnaround story which is visible in the PSU banks is even more commendable as their balance sheets are getting cleaned up.
Today, as the index is up 1.77% to 3,097, by 11:54 AM IST and trading at the highest level since 7 February 2022, one PSU midcap bank is gearing up to deliver a rally from here on. The bank is Indian Overseas Bank (NS:) which is a INR 34,685 crores big bank and holds a 0.48% weightage in the Nifty PSU Bank index. It is a low-beta slow-moving counter and therefore generally does not come on traders’ radar.
The turnaround story in the bank can be gauged by the fact, that it clocked a net income of INR 1,709.28 crores in FY22, which is a massive surge of around 125.3% over the previous year’s income of INR 758.37 crores. More interestingly, it is the highest consolidated net income reported by the bank, at least since FY13. Currently, it is trading at a P/E ratio of 20.29, compared to the sector’s average of 21.21.
Image Description: Daily chart of IOB with volume bars at the bottom
Image Source: Investing.com
Coming to the main attraction of the stock, the daily chart structure is looking extremely positive not just in the near term but also from a longer-term perspective. The IOB share price soared over 3.81% to INR 19.05 in today’s session, surging to the highest level since 19 April 2022. For the last many days, there had been a sideways trend in the stock which has finally resolved toward an upside move.
The volatility expansion in the stock can be gauged by looking at the expanding Bollinger Bands®. This volatility expansion is also telling that after a period of volatility contraction (depicted by narrowing Bollinger Bands), the stock is finally getting ready for a good move as volatility is now expanding. As the inflow in the banking sector remains strong, it would not be surprising if we see a rate of around INR 22 on the screen in the next couple of months. As the stock moves quite slowly, it probably might not be ideal for very aggressive and agile traders.
Although volume levels are not low, but they are also not as high as I would have preferred to see, especially on a day like this when the stock moves decisively in one direction. Still, a closing somewhere around the current levels would definitely make the chart quite positive for the stock’s future trajectory.
