SENSEX NIFTY
May 02, 2012, 12.57 PM IST | Source: CNBC-TV18

Cautious on banking sector; stay away: ICICI Sec

TS Harihar, co-head institutional derivatives of ICICI Securities is cautious on the banking sector.

TS Harihar

Head of Derivatives - Global Prop & Flows

Expertise : Equity - Technical

More about the Expert...

TS Harihar, co-head institutional derivatives of ICICI Securities is cautious on the banking sector. “With the proposed downgrade on a lot of private sector banks, I think banking as a space may actually not only get downgraded, but also hit lower valuations. That is likely to hit the prices of most of the banking stocks, be it PSU or private. Till this overhang of downgrade gets over, I would prefer to keep off buying any banking stocks,” he asserts.

Big moves were seen in the IT space on Monday. In an interview to CNBC-TV18, Harihar says, the broad concern seems to be, among the a lot of traders, that valuations of whole lot of IT companies are stretched, especially companies like HCL Tech and TCS . However, from a trading perspective, he says, TCS could have another 10% upside.

Below is the edited transcript of his interview with CNBC-TV18's Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: On Monday, TCS saw fresh long positions. In Infosys, there was short covering. At this point, does it make sense to enter into anything with a long view?

A: I think the broad concern seems to be, among the a lot of traders, that valuations of whole lot of IT companies are stretched, especially if you look at the companies that have been trading positively over the last one, one-and-half months like HCL Tech and TCS.

TCS, from a trading perspective, probably still looks good for another 5-10%. But I think Infosys would have a lot of long-term questions to answer. Unless these questions are resolved, I would believe that any rise would be an opportunity to sell the stock. But TCS, yes, from a trading perspective, it still looks like it could have another 10% upside.

HCL Tech, I think has already shot up quite a bit from Rs 395 to about Rs 515. I think at these prices it does look fairly priced.

Q: On Monday, some of these PSU banks had a good performance, be it Bank of India or Vijaya Bank, mostly because of the way they perform this quarter. Is there anything that you would add on to the long side from that space?

A: A couple of smaller banks like a Bank of India , probably even a Syndicate , I think the numbers have been encouraging. In an environment, where the results have not been too good, a lot of smaller banks have done well.

But I would be cautious on the space as a whole including the smaller banks. With the proposed downgrade on a lot of private sector banks, I think banking as a space may actually not only get downgraded, but also hit lower valuations. That is likely to hit the prices of most of the banking stocks, be it PSU or private. So, banking as a space, I am little skeptical. Till this overhang of downgrade gets over, I would prefer to keep off buying any banking stocks.

READ MORE ON  Banks, TS Harihar, ICICI Securities
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