Bank of India (BOI) :: Angel Broking Diwali Top Picks (Diwali Muharat)

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PSU Banks such as Bank of India (BOI) are expected to be among the beneficiaries
of an improved economic and policy environment. Further with inflation consistently
declining and gross domestic savings once again entering into financial savings
such as deposits, we expect interest rates to decline going forward. This is expected
to improve the operating performance of banks such as BOI on all fronts including
credit growth, asset quality and treasury gains.
 Benchmark 10-year bond yield has fallen to 8.46% and is expected to fall further
due to the softening trend in inflation, which is expected to contribute to substantial
treasury gains for banks such as BOI.
 In the last ten years, BOI has traded at an average P/ABV multiple of 1.1x and in
the range of 0.7x to 1.4x. Currently it is trading close to its bottom average trading
range in the last 10 years and at an attractive valuation of 0.5x FY2016E P/ABV,
which is at a 44.4% discount to its closest peer, Bank of Baroda. We expect the
valuation gap to narrow with improving fundamentals. Hence we maintain our
Buy view on the stock with a target price of Buy view on the stock with a target price of ```310.