Wednesday, July 24, 2013

Allahabad Bank

I had recently added a position of Allahabad Bank. One @ 92 and another @ 85.
The stock had gone down since i bought. If it hits some more lower levels i would considering buying some more.
Recently all the public sector Bank stocks took a hit after RBI tightened rules on liquidity. With the fresh set of regulations most of the banking stocks hit a 52 week low. Added to this banking stocks had rising npa levels which made them not so attractive to markets.
I have the following reasons to buy a public sector bank.

Allahabad Bank has a good track record of dividend. So if you buy at current levels or lower levels the dividend declared will be almost equivalent to FD rates after taxation. Anything over an FD rate is a bonus for me  and also a safe bet since it is a public sector bank. Now you may ask me why i bought Allahabad Bank when a whole lot of other banks are available. Well my inclination was towards dividend yield and i observed Allahabad Bank and Andhra Bank had good dividend yield. In these two i added Allahabad Bank since i had been tracking this stock for quite sometime. Now since my average price is higher than the current levels do i consider selling to limit my loss - the answer would be no.  Well if you are not ready to take at least 25% loss on paper then you are not for investing. So i would not sell even if it goes down to 70 levels.

Note : I may be right or I may be wrong...but i had risk appetite so i could buy the above mentioned stock. Please do your due diligence before you buy.

Update on 26 Jul 2013 : The stock is now available for interesting price of 75 and dividend yield[if dividend continues to be same as last year] of 8% fairly making it equivalent to a FD with an appreciation. Further downside also possible. I just wait with fingers crossed

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