Tuesday, October 11, 2016

Why PFC and REC Shares Are Hammered on the Indian Bourses?

A very thought provoking question indeed. Thank you for raising it. Thank you. The answer as I see it is as follows:
People to tend to categorise and group companies into a category and give all the constituents of the group the same treatment irrespective of their individual merit. Banks and financial institutions fall under one category. Banks have accumulated a large amount of bad loans or ‘Non Performing Assets (NPAs). The Reserve Bank of India (RBI), under the previous governor, had ordered banks to wash their books and make adequate provision for losses arising from NPAs. As a result most of the banks have been declaring losses after making ample provisions against NPAs in the last few quarters and as a consequence their share prices have seen steep declines.

Banks Afflicted With NPAs

REC and PFC also have been making some provisions fir NPAs but to a very small extent. Their margins are also attractive. However the market is showing them the same treatment along with banks and has battered their stocks.
I also noticed that recently (last week) they had shown smart recovery showing 4–6% price increase in a single day.
Finally I totally agree with you. REC and PFC are showing consistently showing good results and have been unjustly battered along with bank stocks. Therefore, this is a good opportunity to buy these two stocks at low prices.
Thank you,
With Best Regards

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