‘Fraud’ is a commonly used word when it comes to Public Sector Banks (PSBs). This is because scamming became a motive in their functioning.
The examples of Harshad Mehta, Vijay Mallya, Nirav Modi, Mehul Choksi and many more brought the Indian banking system to its knees.
Even after all these scams, the PSU Bank Index was a leading industry index between 2004 and 2010, gaining more than 500%.
From its 2010 high, the index corrected about 80% into the pandemic low.
But what do the graphs say now?
The multi-year trendline breakout
Since its 2020 low of 1,078, the index is up more than 250% in the past 30 months.
On the weekly chart of the PSU Bank Index above, the break of the 12 year downtrend and bearish structure according to the Dow theory ended in the form of a lower high – lower low structure in November 2022.
The index has broken out of the descending trendline, indicating that the 12-year bearish trend has come to an end.
The higher high-higher low pattern since the 2020 low is the sign of a bullish trend according to the Dow theory. The icing on the cake is the breakthrough of the horizontal trend line on the chart.
In recent months, the PSU banks have been on the minds of traders and investors for outperforming the private banks.
As of June 2022, the PSU Bank Index is up 70% and has outperformed the Private Bank Index, which is up 30%.
This exceptional outperformance has attracted investors and traders in recent weeks. Any dip in these stocks is aggressively accumulated.
In July 2022, when no one was interested in buying PSU Bank stock, I shot a video about PSU Banks.
Since the video, the index is up more than 40%.
With the kind of outperformance of PSU Bank stock, I reiterated my opinion on the index in another video – Diwali Picks for Samvat 2079.
Looking at the constituents of stocks in the index, stocks with negligible weighting in the index outperform.
I believe this is the start of a new journey for the PSU banks and it could last for the next 5-8 years. In fact, PSU bank stocks may become the best stocks for the next 10 years. We will get to know it in the future.
I will share more about his trend in my Telegram group. If you are interested in being a part of my charting journey as I share how to create wealth with profitable trade setups, join my telegram channel – Fast Profits Daily.
(Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.)
This article is from Equitymaster.com
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