Many top mutual fund managers including Raamdeo Agrawal of Motilal Oswal and Krishna Kumar of Sundaram Mutual Fund are eyeing recovery in the Indian banking space in the coming fiscal. Even as Indian banks grapple with burgeoning NPAs, S Krishna Kumar of Sundaram Mutual Fund says that FY-19 could be the year for banks. In an interview to ET Now, Krishna Kumar said, “The NPA problem should get fast-tracked in the next 6-12 months. The new SEBI norms will ensure that fund-managers who are running mid-cap funds will have to invest into that space.” According to him, banks are already recognising NPAs in the current quarter.
In an interview to ET Now, Raamdeo Agrawal of Motilal Oswal said last week, “PSU banks which are down and out right now, can they come back? I don’t have any doubts. They will bounce back.” Interestingly, PSU bank shares have abysmal returns in the year so far. State Bank of India shares have shed more than 2.5% since January. Allahabad Bank shares have tanked by more than 10% in the last one month. Andhra bank shares have given negative returns in 3-year, 5-year and 10-year basis. These returns are in stark contrast to the BSE Bankex returns of more than 31% in the year so far, buoyed primarily by the performance of private sector bank shares in the year.
While Raamdeo Agrawal is betting on PSU banks, Manish Chokhani of Enam Holdings is bullish on the prospects of the private sector banking space in India. In an interview to ET Now, Manish Chokhani said, “There is serious money to be made in the whole private banking space because this big shift of financialisation, digitisation is here to stay. Money will move over there.” The expert predicts that private sector banks will increasingly dominate the lending space in india. “It cannot be that public sector banks remain 70% of India. Incrementally anyway 50% is going to private sector banks and NBFCs. What happens to Air India, what happens to MTNL what happens to sector after sector – Doordarshan,” he told the channel.
Explaining the shift, Manish Chokhani, Director of Enam Holdings said, “Inevitably it will happen to the public sector space with no disrespect there are fine managers there, but the decision making is so tied up that in an agile world, you would end up losing. Compensation levels are not great either. All of that put together makes you believe that the opportunity for private banking, NBFC, insurance, AMC, brokerages is just fantastic in India.” In the Financial Stability Report published in June, the Reserve Bank estimated that the average gross NPA ratio of all scheduled commercial banks could rise from 9.6% in March 2017 to 10.2% by March 2018.