A Comparative study of Risk and Return of PNB and HDFC Bank

INTRODUCTION
Punjab National Bank (abbreviated as PNB) is an Indian Public Sector
bank based in New Delhi. The bank was founded in May 1894 and is the
third largest public sector bank in India, both in terms of its business
volumes and its network. The bank has over 180 million customers,
12,248 branches, and 13,000+ATM’s
PNB has a banking subsidiary in the UK (PNB International Bank, with
seven branches in the UK), as well as branches in Hong
Kong, Kowloon, Dubai, and Kabul. PNB got listed in the year 2005 with
an issue price of 390RS per share. The size of IPO was 3120CR. The
face value was RS 10 per share. PSU Bank index comprises of the
following Banks:
1) State Bank of India
2) Bank of baroda
3) Canara bank
4) PNB
5) Union Bank of India
6) Indian Bank
7) Bank of India
8) Indian overseas bank
9) Central bank of India And
10)UCO bank

Amongst these 10 Banks PNB is the 4th largest PSU Bank Which has
12.61% share in the PSU Bank index.

SHAREHOLDING PATTERN
As on Dec 2022, the shareholding pattern of PNB is as follows:
1) Promoter 73.2%
2) FII 1.7% ( raised by 0.49%)
3) Mutual fund 4.1 (raised by 0.49%)
 4) Institutions 14.7%(raised by 1.1800%)
Rest 6.3% is held by general public.
PNB and almost all the PSU Bank’s have generated negative
returns over the past 5 years. PNB generated a negative return of
46.28% in the last 5 year. As a result of this the whole PSU bank
index has underperformed.

Key Metrics:
a) Market cap- 56,486.51 crore
b) PE ratio- 30.94
c) PB ratio- 0.58
d) Dividend yield- 1.25%
e) EPS- 1.66.

HDFC Bank Limited (also known as HDB) is an Indian banking and

financial services company headquartered in Mumbai. It is India's largest
private sector bank by assets and world's 10th largest bank by market
capitalisation as of April 2021. It is the third largest company by market
capitalisation of $127.16 billion on the Indian stock exchanges. HDFC
Bank was listed on the Bombay Stock Exchange on 19 May 1995. The
bank was listed on the National Stock Exchange on 8 November 1995.In
the year 1996 the Bank was appointed as the clearing bank by the
NSCCL. In March 1995, HDFC Bank launched its first IPO of `500
million (50,000,000 equity shares at `10 each at par).
In March 2022 Housing Development Finance Corporation parent
company of HDFC Bank, made an investment of ₹1,000 crores in Yes
Bank. As per the scheme of reconstruction of Yes Bank, 75% of the total
investment by the corporation would be locked in for three years. On 14
March, Yes Bank allotted 100 crore shares of the face value of ₹2 each
for consideration of ₹10 per share (including ₹8 premium) to the
Corporation aggregating to 7.97 percent of the post issue equity share
capital of Yes bank.

SHAREHOLDING PATTERN
1) Promoters 20.88%
2) Foreign Institutions 26.18%
3) Mutual funds 14.98%
4) General public 9.45%
5) Financial institutions 8.16%
6) GDR 18.44%

HDFC Bank is a component of NIFTY private Bank index. This

index comprises of:
1) HDFC Bank Ltd. 26.96%
2) ICICI Bank Ltd. 25.43%
3) Kotak Mahindra Bank ltd 10.69%
4) Axis Bank Ltd. 10.19%
5) IndusInd Bank Ltd. 10.09%
6) Federal Bank Ltd. 5.62%
7) Bandhan Bank Ltd. 3.60%
8) IDFC First Bank Ltd. 3.47%
9) City Union Bank Ltd. 2.05%
10) RBL Bank Ltd. 1.90%
Among these HDFC Bank ltd has the highest weightage in NIFTY
private Bank index as well as NIFTY Bank index. Over the past 5
years despite of lockdowns HDFC Bank and NIFTY Bank has
outperformed. HDFC Bank has generated around 77% returns over the
last 5years.

KEY METRICS:
a) PE Ratio 20.70
b) EPS 78.62%
c) Market cap 9,07,505 cr.
d) PB ratio 3.63
e) Dividend yield 0.95%
 TECHNICAL ANALYSIS
Technical analysis tools are used to scrutinize the ways supply and
demand for a security will affect changes in price, volume, and implied
volatility. It operates from the assumption that past trading activity and
price changes of a security can be valuable indicators of the security's
future price movements when paired with appropriate investing or trading
rules.

It is often used to generate short-term trading signals from various charting

tools, but can also help improve the evaluation of a security's strength or
weakness relative to the broader market or one of its sectors. This
information helps analysts improve their overall valuation estimate.

Technical analysis as we know it today was first introduced by Charles

Dow and the Dow Theory in the late 1800s. Several noteworthy
researchers including William P. Hamilton, Robert Rhea, Edson Gould,
and John Magee further contributed to Dow Theory concepts helping to
form its basis. Nowadays technical analysis has evolved to include
hundreds of patterns and signals developed through years of research.

Technical analysis comprises of :

1) Candle stick analysis

2) Multiple Time Frame analysis
3) Trend analysis
4) Sectorial analysis

Indicators used for Technical analysis are :

1) Relative strength Index( RSI) which shows the strength of the stock.
Above 70 in daily time frame says that the stock is slightly
overbought and a small correction can be expected. On the other
hand below 30 indicates oversold situation which says that a slight
dead cat bounce is expected.
2) Volume Indicates the participation in the market. This is helps in
finding out fake breakouts on the charts.
3) Moving average convergence/divergence (MACD) is a Trend
following momentum indicator that shows the relationship
between two Exponential moving averages of a security’s price. The
MACD line is calculated by subtracting the 26-period EMA from
the 12-period EMA.
4) Moving averages is generally used as support and resistance.
Widely used MA’s or EMA’s are 20,50,100,200.
Technical analysis of PNB and its sector i.e. PSU Bank to
find out the risk reward.

Top Down Approach of PNB

Quarterly time frame analysis:

Daily time frame analysis:

Monthly time frame analysis:

The Current market price of PNB is 51.30. The stock is moving up from
its 52 week low of around 28rs. Recently it made a high of around 62
Rs.The stock has hit Quarterly supply zone(62-69). Stock retraced after
hitting QSZ. It came till 47 wherein there was a Daily demand zone. The
stock started moving up from the DDZ. As per advanced trend analysis,
on daily time frame the trend is sideways whereas on weekly time frame
still the trend is up.

PNB has witnessed huge life time high volumes recently. This is an
indication that this stock has a long way to go. Closing above 69-70
levels can help this stock to move upto 95-100 levels.

Recently the stock gave closing above Monthly 20ema which is a

beautiful sign. The stock might retest Monthly 20 Ema which is around
43-44 along with weekly 50ema support.This stock should be
accumulated at 43-45 levels if it comes over there. The sector has
support around 3400 levels and 2800-2900levels. If the stock touches
43-45 levels along with sector support, there won’t be any better time for
investors to corner this stock.In worst case PNB might plunge till 37
levels wherein it has a Monthly DZ. That will also be a good opportunity
for the investors.

Now in order to understand this better let us do sectorial analysis i.e.

PSU bank’s analysis.
Monthly time frame analysis

Weekly time frame analysis:

Recently the Sector has hit Monthly Supply zone. Although the zone
was non authentic still it was somewhere close to its all time high levels.
So it was expected that the sector will retrace as even many PSU bank
stock’s had hit the supply zone. We can see that the sector had made a
low of around 1050-1100 levels during covid crash wherein we saw
tremendous volumes in the whole sector and even the respective public
sector banks. This volume itself is an indication of huge accumulation.
The sector bounced back from its WDZ around 3400-3500 levels. The
trend is down in daily timeframe whereas in weekly time frame the trend
is sideways. Closing above 4070 levels will again show a uptrend in
weekly time frame. The sector however can touch its MDZ wherein its
very good time for the investors to accumulate stocks. Sector at 2800-
3000 plus PNB at 43 levels will be a deadly entry time with a long term
perspective.

CONCLUSION and my perspective on PNB: The sector has faced

resistance around 4300-4500 levels for 3 times and this is the 4th time
the sector had tested these levels. The point to be noted here is this
time the sector as well as the PSU bank stocks has recorded life time
high volumes which says that this sector has a long way to go.
According to me PNB, CANBK, Bank of Baroda are the dark horses
among PSU Bank’s. I’m expecting PNB to touch even 150-170 levels
from current level.

Stock can be entered around 37-45 levels for a target of approx 150
with a stop loss of around. The risk reward here is approx. 1:5

Thus it’s a buy on whole sector and the top weighted stocks of this
sector.
 Technical analysis of HDFC BANK and its sector NIFTY BANK to
find out the risk reward

Quarterly time frame analysis

Stock is currently trading above Quarterly 20ema and is close to it all

time high. However the stock has a Quarterly demand zone around 1100
levels.In case the stock touches those levels it will be a beautiful
opportunity for the investors to accumulate the stocks.
Weekly time frame analysis

The stock has an uptrend in weekly time frame and is also trading
above weekly 20 ema. Closing above1680 levels can help to witness
an all time high in this stock. Individually the stock is good but we
need to consider NIFTY BANK as well.
Sectorial analysis i.e. NIFTY BANK analysis
Monthly time frame analysis:
Weekly time frame analysis

Nifty Bank is extremely well placed in monthly charts. Nifty bank has
recorded all time high volumes since covid crash. From around 16000
levels it moved till 43000 levels. Currently it retraced and started
moving up from Monthly demand zone. The trend is sideways in
weekly and daily time frame. Closing above 42000 level in bank nifty
will change weekly trend into positive. Bank Nifty has strong support
around 39000 level along with monthly 20 EMA. Panic in Bank nifty
will be triggered only on a closing below 37200 level.
Conclusion and my view on HDFC BANK:
AS long as the trend remains positive and BANK NIFTY holds the
above mentioned level HDFC BANK is well placed. This can be
accumulated even at 1530 levels when BANK NIFTY touches 41600
levels that is daily demand zone with EMA support.
OVERALL MARKET ANALYSIS i.e. NIFTY ANALYSIS:
Monthly time frame analysis:

Same as BANK NIFTY even Nifty is moving from MDZ. During covid it
tested around 7500 levels. From there it moved till 18600 levels.
Closing below 16700 levels cantrigger panic and we can see 15700
levels in Nifty.

Weekly time frame analysis:

As per advanced trend analysis the trend in weekly time frame is
sideways. Closing above 18150 levels will again signal uptrend.
In case NIFTY falls 1600-16200 can act as a strong support.
However the movement of nifty will be dependent on RELIANE,
BAJAJ FINANCE, HDFC BANK as these are the top weighted stocks of
NIFTY.

CONCLUSION
According to me I think PSU BANKS are going to rule the Decade.
Given 100 rs I will Invest 80:20 in PSU BANK and Private bank
respectively.
So I would like to conclude my study based on technical analysis
that although PNB is beaten down badly in coming years PNB can
fetch 3x returns easily from current levels whereas its difficult for
HDFC BANK to fetch the same returns. So looking at the risk reward I
would prefer PNB over HDFC BANK.
• GRAB YOUR SEATS BEFORE IT GETS TOO CROWDED- MADHU
KELA on PSU BANK’s.
• DECADE WILL BELONG TO PUBLIC SECTOR BANKS- RAMDEO
AGARWAL