The entire financial services space is looking okay to us now: Vinay Sharma
Abstract: “As of now, there is no clear demarcation or a clear choice between large private sector banks or large PSU banks or mid-sized banks. All of it looks fairly attractive at this point. But we have been sanguine on the midcap and small-caps now. Also, we have been increasing allocation to some of those names for the last few quarters.”
Vinay Sharma, Equity Fund Manager, Nippon India Mutual Fund.“Indian corporates have deleveraged and now there are no more big stresses coming out of any segment of industry or MSME or in the retail segment. Even some of the non-lending segment such as insurance and capital market plays have corrected a lot in last few quarters.”
Big Private lenders are not performing in trade, but midcap names are shown performing in Q1 data and market. What is your reading on how the sector is placed?
It is a matter of the rising tide lifting all the boats. During the last five-six quarters, the fundamentals of the banking sector have been improving continuously. It is now starting to reflect in stock prices as well.
At the outset, some midcap names were more attractive than some large cap names, and probably at the beginning, some midcap names outperformed other segments as well. Due to the fact that large caps have done well for the last couple of quarters, perhaps it is a difference between starting points, or perhaps it is an issue of ownership – large caps are generally well owned, while midcaps and small-caps may not be as well-liked, especially in the financial sector.
There are several good banks to select from. Do you think PSU banks have made the cut now?
Frankly, it is a very difficult question at this point in time. If you had asked me one or two years back, I would have said that the large private sector banks are best placed in terms of market share gains positioning and in terms of portfolio quality. But today, most of the segments and large and mid-sized banks have cleaned their balance sheets to a large extent.
There are several factors that contribute to the difficulty of this question. Large private sector banks and large public sector banks remain the most important questions mainly because they are large, liquid, and valuations remain reasonable, but we have been sanguine in regards to midcaps and small caps.