Some downside in banking stocks: Agarwal

Vaibhav Agrawal of Angel Broking is of the view that in the near-term one could expects some further downside in banking stocks.

Agarwal told CNBC-TV18, "In banking stocks there could be some further downside in the near-term with more bad news on the horizon. But even at these prices the top banks are a good buy. You can go for businesses considering that all banks are pretty cheap. It is best to go with the best franchise with the best businesses, the leaders. As far as private banks are concerned, their secular expansion continues in terms of their branch rollouts and so on. So they will continue to gain market share. Even if the industry grows at about 18%, if they grow at 25% you have got a pretty good growth story even if it is not 30-35% as it was earlier. It is just that in the near-term I think there will continue to be some pressure and the trigger is bound to be what the inflation scenario turns, which could be dependent on global monetary policy and how it shapes up with major central banks. So that is something to be looked at probably right now."

He further added, "Our top picks are definitely the private sector banks like ICICI Bank, Axis Bank and HDFC Bank. There is a lot of value even in the PSU bank space. But there could be further downsides in the near-term. So it would probably make sense to stick with the best quality banks right now. SBI is also a good buy right now given its leadership position. In their financial performance you can clearly see the leadership coming through. Punjab National Bank again has great CASA ratio and so on. But I think they are going to have some pressures on their agricultural long portfolio in the near-term. So that is probably pulling down the prices right now for them. But again, definitely a good franchise."