State Bank of India (SBI) Stock Analysis: Buy, Sell, or Hold?

Synopsis: Since April end, SBI shares have consistently traded above Rs 800, peaking at Rs 912 on June 3, 2024, following positive exit poll results. Although the initial euphoria waned, the stock stabilized above Rs 800. Currently, it is trading at Rs 840.20 with a market cap of Rs 7.49 lakh crore. Technical indicators suggest a strong position, with the stock trading above key moving averages and showing significant gains year-to-date. Incred Equities and Motilal Oswal recommend holding or buying with target prices of Rs 1,100 and Rs 1,015, respectively, citing strong asset quality and financial performance.

Since the end of April, SBI shares have been consistently trading above the Rs 800 mark, reaching a record high of Rs 912 on June 3, 2024, driven by positive market sentiment following exit poll results favoring the ruling NDA. This bullish trend, however, was short-lived as the stock dipped to Rs 770 on June 4 before stabilizing above Rs 800 again.

In the latest trading session, SBI's stock closed 0.44% lower at Rs 840.20, bringing the bank's market capitalization to Rs 7.49 lakh crore. The trading volume was significant, with 17.06 lakh shares exchanging hands, resulting in a turnover of Rs 143.52 crore on the BSE.

Technical and Market Analysis

SBI shares are currently not in the overbought or oversold zones, as indicated by a Relative Strength Index (RSI) of 54.1. The stock also boasts a one-year beta of 1.3, signifying high volatility over the period. It is trading above its 5-day, 10-day, 20-day, 50-day, 100-day, and 200-day moving averages, suggesting a strong upward momentum.

Year-to-date, SBI stock has risen by 31%, and over the past year, it has gained 45.75%. Such performance underscores the robust recovery and growth prospects anticipated by investors.

Investment Recommendations

Incred Equities recommends an 'add' rating with a target price of Rs 1,100 in a bullish scenario, citing strong asset quality and a favorable competitive position due to a lower Credit-to-Deposit (CD) ratio. They highlight that the standalone SBI, with a Return on Assets (RoA) of over 1% and improving asset quality, is attractively priced at 0.8 times its FY25 forecasted book value.

Motilal Oswal Financial Services Ltd (MOFSL) has a 'buy' recommendation with a target price of Rs 1,015, predicting a 15% compound annual growth rate (CAGR) in net profit from FY24 to FY26. They project SBI's Return on Equity (RoE) and RoA to reach 18.5% and 1.1%, respectively, by FY26.

Outlook and Strategy

The positive outlook for SBI is supported by its strong financial performance and strategic positioning in the market. The bank's significant recovery in earnings and robust asset quality are pivotal factors for its valuation. Investors are advised to consider holding the stock, with a potential upside target of Rs 1,000 to Rs 1,100, depending on market conditions and the bank's performance relative to forecasts.

Disclaimer: The information provided is based on sources deemed reliable but is not guaranteed. Always consult a financial advisor before making investment decisions. The views expressed are those of the respective analysts and firms.