SBI Share Price

SBI is the largest public-sector lending bank. The stock prices of SBI are booming lately, but the bank keeps incurring losses. The reason for the ever-increasing stock prices and a large number of Non-Performing Assets(NPS) which result in a high level of loss is bad loans. The Chairman of State Bank of India, Rajnish Kumar targets the SBI share price to go up by 2020 and plans on reducing the amount of NPA down to 6% by then. This optimistic view also comes from the fact that the SBI share price has been shooting up irrespective of the bottlenecks faced by the bank.

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SBI Share Price: History and Trends

  1. In comparison to the third quarter of Financial Year 2016-17, there was a drop in the net profit in SBI's share in the third quarter in 2017-18. In the first quarter of 2018-19, the largest lender in terms of assets, SBI, incurred a loss of 7718.17 crores. This could be attributed to the bad loans extended by the company.
  2. The Gross Non-Performing Assets as a percentage of the total assets owned by the bank stood at around 10% in the first quarter of the current financial year. The total provisions for SBI exceeds its counterparts by more than six times; this could be one of the reasons why SBI share price has been touching all-time low levels. Investments in the SBI stock shares have declined over the years, the only time there was a steep increase in the buying of SBI stocks was back in 2014 when there was an SBI stock split which reduced the price of the SBI stocks outrageously.
  3. In the last year, SBI stock prices have declined by more than 16%. After the government has announced the scheme of recapitalizing the NPA-ridden Public Sector Units in October 2017, the SBI stock price had plummeted by 40%. Soon enough, in the first quarter of 2018, SBI stock shares experienced the highest quarterly loss of 7,718.17 crores. The reasons for such high loss in the first quarter were attributed to the growth in corporate slippages, plummeting increase in NPAs and high levels of provisioning.
  4. On NSE and BSE, SBI stocks started off trading for the first time on 1st of January 2016. However, in a few weeks, SBI share price declined substantially. In February 2016, SBI stock shares were trading at prices below 200 Rupees. Back in end-2014, SBI stocks closed at 2920.4 Rupees and it closed at 290 Rupees the very next day. This is attributed to the SBI stock split which occurred in November 2017. The stock value remained the same while the prices of each separate stock declined.
  5. In February 2016, the SBI stock price reduced again hitting a low of 155 Rupees. The decline in stock value was attributed to the investors selling off most of the SBI stocks.
  6. The implementation of RBI's Basel norms resulted in an increase in the SBI share price in March 2016.
  7. A hefty amount of 500 Crore rupees were raised through Tier-2 bonds by SBI and the lending rates were based on a different methodology i.e, Marginal Cost of Fund Based Lending Rate or MCLR. This improved the sentiments of investors.
  8. The SBI share prices decline to Rs. 180 in April 2016. The ups and downs seen in this particular quarter were not very dramatic even if the major decision of merging of five associate banks was taking by SBI.
  9. In May, to improve the NPA condition within SBI, the bank announced to put a limit to the lending by large borrowers. The SBI stocks increased slightly to an average of 165 Rupees this month.
  10. In the next month, there was an increase in the SBI stock price up to 202 Rupees.
  11. In June, the merger of SBI with its five associates, the SBI market shares had improved drastically. The improvement in stock prices led to a high number of investors buying the shares which further ballooned the value of SBI stock to 215 Rupees
  12. The merger of SBI with its associate banks further pushed the SBI stock value up to Rs.260 in August 2016.
  13. The Central Government took a path-breaking decision of demonetization of the Indian currency on 8th November 2016. The advent of demonetization resulted in an increase in the SBI stock prices to a striking 281.30 Rupees but it came down in the closing month of the year to 249.75 Rupees.
  14. In January 2017, the SBI shares remained steady at the 250 benchmark. But towards the end of the third quarter of 2017, the SBI stock prices hit an all-time high of 282.80 Rupees.
  15. The merger of SBI with its associate banks was completed in June which resulted in an increase in the SBI stock prices to 290 Rupees.
  16. The historical decision of dematerialization of NPAs in all Public Sector Banks including SBI came in May 2017. The expectations of the investors were improved and the SBi stock prices improved to a fifty-two week high of 304.90 Rupees.
  17. By the end of July, SBI stock prices increased to a jaw-dropping value of 310. This happened majorly due to the approval of the Initial Public Offering of SBI Life Insurance.
  18. The change in directorate further declined the value of SBI stock to decline to 270.45 even if the first quarter of FY 2018 announced a sizeable net profit accrued by SBI.
  19. SBI stroke a deal with Escort for financing tractors which led to a recovery in prices by 3% in October. The recapitalization of Non-Performing Assets was also one of the reasons for the SBI share price reaching a level of 328.05 in October.
  20. At the end of the year 2017, the SBI share price continued to remain at 300 Rupees and on the last day of the Year 2018, the share prices touched a point of 309 Rupees.

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Is Investing in SBI Stocks a Good Idea?

PE or Price-Earnings Ratio is one of the widely used factors for screening the stocks. If the PE ratio of a bank is high, the investors will anticipate higher returns and hence end up pitching more into the stock. PE ratio is the money that the investors are willing to pay for each rupee of earning with the company. High PE ratio indicates that the investors anticipate positive earnings from the stock. However, a high PE ratio doesn't necessarily indicate that the earnings from the particular stock will be high. A high PE ratio can also be a result of over-valuation of the stock.

SBI's average PE Ratio in 2016 was 14.4. But it plummeted to 761.8 in 2017 and finally, the average PE ratio crashed down to -56.0 at the end of March 2018. The radical trend in PE Ratio shows that the SBI stocks are highly volatile in terms of market anticipation.

A negative PE ratio indicates that the company has negative earnings.

Along with a negative PE ratio, SBI has large NPA which keeps multiplying by the year. This could be attributed to the poor micro and macro management of the bank. High Non-Performing Assets could reduce investors faith in the company; this could lead to poor performance of the stocks.

There's been a drastic increase in the total provisions of SBI. Even if the company manages to incur higher net profits, large provisions would always demotivate the investors.

If we follow the trend from the past five years, SBI stocks haven't been quite impressive compared to private banks. There are chances that SBI stock would crash dramatically in the coming years. So, it's better to invest in private banks' stocks with have a better PE ratio and relatively lower NPA.

What is SBI?

State Bank of India is a financial institution known for an extensive range of financial products such as home loans, student loans, life insurance etc. It is a public-sector bank of India and owned by Government of India. It's spread across the globe with 190 offices in 36 countries. In 2016, SBI was a part of the Fortune 500 list. About one-fourth of the loans and deposits are held by the State Bank of India.

  1. Rajnish Kumar is the Chairman of SBI. He assumed the position of Chairman in October 2017. Before assuming office as the Chairman of SBI, Rajnish was working as the Managing Director of the National Banking Group and the Compliance and Risk Department of SBI.
  2. B. Sriram is the Managing Director(Corporate and Global Marketing) of SBI. He has held many managerial positions before including the MD of State Bank of Bikaner and Jaipur, which is SBI's associate bank before the merger.
  3. Praveen Kumar Gupta is the Managing Director for Retail and Digital Marketing in SBI. Earlier he has served as the MD and CFO of State Bank of India. He has also served as a Regional Head in Middle Eastern and North African offices.

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How can you purchase shares of SBI

Shares of SBI can be purchased from NSE(National Stock Exchange) and BSE(Bombay Stock Exchange) in India. Details regarding the stock price, PE ratio, previous closings and other metrics that could help in judging the SBI stock can be found on BSE and NSE-India website. SBI stocks are also listed on the London Stock Exchange. SBI is also listed on the Benchmark Indices of India like BSE Sensex and Nifty.

Where to invest: Stocks or Mutual Funds?

Investing in the stock market requires you to have the accurate knowledge of the trends and a lot of research has to be done to infer the best stock where you can invest. It's easier to invest in mutual funds since such investments do not require you to have a vast knowledge of the market. Also, compared to stocks, mutual funds involve a substantially lower level of risk. If you're risk-averse and have less time to spare to learn the tactics of the stock market, then we suggest you to invest in mutual funds.

It is important to note that the opinion presented in this post is just an observation of the market trends and cannot be considered as professional advice.

Indexes and Exchages

Bombay Stock Exchange (BSE)

The BSE or the Bombay Stock Exchange is Asia's oldest and first stock exchange. It is located in Mumbai, erstwhile Bombay, and it was formally established in 1875. An influential stockbroker and a businessman, Premchand Roychand, along with a handful of acquaintances, started the BSE journey in 1855. The BSE had its meetings under Banyan trees in its initial days. The group grew and eventually moved to a permanent place in 1874. BSE’s office is very appropriately named ‘Dalal Street’ which translated to Broker Street in Hindi. BSE operated as a floor trading exchange for a long time before ascending the digital ladder in 1995. They implemented an automated trading platform which had a capacity of 8 million per day. BSE went global in 2012, by joining the United Nations Sustainable Stock Exchange as a partner. Subsequently, in 2016, BSE established the first international exchange of India, called INX.

National Stock Exchange (NSE)

With an aim to induce transparency to the Indian capital market, the Indian Government implored a group of leading financial institutions for an effective solution. Accordingly, these financial institutions, along with the Government's support, established the first demutualized electronic exchange of India in 1992, known as the NSE. Since its inception, the NSE functioned on a totally automated screen-based digital trading system, which offered a great platform to connect the investor base of the entire country and offer them an easy trading facility. NSE was India's first electronic exchange and currently offers services pertaining to several segments, such as equity derivatives, clearing and settlement services in equity, trading, debt and currency derivatives, etc.

NIFTY Index

The NIFTY is National Stock Exchange of India's benchmark broad-based stock market index for the country's equity market. It lists 50 selected Indian companies across 12 sectors that own the largest and most liquid Indian securities. Hence, it is popularly called NIFTY 50. The Nifty index represents the weighted average of the stock value of those 50 companies. The India Index Services and Products or IISL, a company which is focused on an index as a core product, owns and manages the Nifty. Through one efficient portfolio, the Nifty exposes investment managers to the current status of the Indian market and helps in determining promising investment opportunities.

SENSEX Index

Similar to NSE's Nifty 50, BSE also has a stock market index known as Sensex. The word comes from the words 'Sensitive' and 'Index,' and is basically a portmanteau of the two. BSE 30 and S&P BSE SENSEX are two other names of this index. Sensex constitutes the top 30 financially flourishing and well-established companies from the ones listed on BSE. These companies typically represent diverse industrial sectors of the country's economy to ensure a holistic calculation. Usually, these are the companies that have the largest and most actively traded stocks. SENSEX is broadly reported through both print and electronic media in national as well as international markets. The scientifically designed indexing system is based on globally accepted construction and review methodologies. It is being calculated on the basis of a free-float market capitalization methodology since September 2003.