Buy Indian Overseas Bank: Aashish Tater

Aashish Tater, Head of Research of Fortunewizard.com told CNBC-TV18, "If you see the entire Bank Nifty to Nifty ratio it is trading at four and half years low and given that we were negative on the entire banking, last time when I talked about Bank Nifty we said that the entire Bank Nifty is overbought and more index inclusions are actually going to create a panic and it had led to distribution."

He further added, "The Indian Overseas Bank (IOB) management post the result said that part of their restructured loan will be factored into the next quarter. The government money that they were about to infuse at Rs 78.56 is about to come in July itself. So that will strengthen the balance sheet part."

"Take another call from management perspective. They say they will be able to raise USD 500 million for five and half years for their expansion in abroad because ECB is not allowed in India. But for expansion abroad they will be able to do this. So republic of Korea, Mongolian is where they are trying to expand. So if take that angle and see the balance sheet, after that Rs 1000 crore of infusion and the lower cost of debt, we feel the fair value of this stock should be somewhere around Rs 55-58."

"The three things that market is right now focusing on are, first the asset quality. We ran this particular model and we feel the worst at this particular balance sheet from here on is another 10 percent. So you are getting Rs 35-36 that is the worst case scenario for this particular stock given the NPA that has been left on the restructured aspects as well as NPA going back, because all the big loan book, which has actually defaulted has already been factored in the balance sheet."

"Now take another scenario. The bank is constantly looking for recovery and they have done a good amount of recovery which will again be reflected even in the next quarter results itself. So what will happen is the asset quality will improve substantially from current levels. Any surprise on upside market tends to reward very fast."

"We have seen what has happened to Punjab National Bank . On one result day the stock gives you 15 percent return just because of a small recovery because the excess short that is built into the Non-Banking Financial Banking Companies (NBFCs) and the banking system we feel if someone takes a balance sheet call on the stock there is likely possibility and hold for next two and half years they will get at least 40-60 percent return gradually and the amount of dividend that these PUS banks are offering we feel this is very lucrative. You can make a scattered purchase because next six months is going to be challenging for the entire banking scenario. But the scattered purchase will give you tremendous returns from current levels in the banking PSU space."

Disclosure: Safe to assume stock recommended to clients but no personal position.

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