Check out: Angel Broking's top picks from banking sector

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Check out: Angel Broking's top picks from banking sector

In an interview with CNBC-TV18, Vaibhav Agrawal, VP Research, Banking, Angel Broking gave his readings and outlook for the banking sector. He said, "We like few midsized PSU banks now, considering that interest rates looked to have peaked."

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Corporation Ban BSE | NSE 31/05/12 Are Mutual Funds betting on Corporation Ban? Other Stocks in this news Indian Bank | Syndicate Bank | Indian Overseas Bank |

In an interview with CNBC-TV18, Vaibhav Agrawal, VP Research, Banking, Angel Broking gave his reading and outlook for the banking sector.

He said, "We like few midsized PSU banks now, considering that interest rates looked to have peaked."

"Looking at the overall sector definitely, we see some of the headwinds that were really affecting the sector in the past couple of months easing out. There is definitely upside in several of the stocks in the banking space, he added. "We like some of these structurally good quality ones such as Corporation Bank , Indian Bank at this point of time," he says. 

Below is the verbatim transcript of Agrawal's interview with of CNBC-TV18. Also watch the accompanying video.

Q: In the smaller banks which one would you prefer and do you think is available at reasonable valuations at this point?

A: We like few midsized PSU banks now, considering that interest rates looked to have peaked. So, once again the increase in interest rates is factored into the price. Since no more incremental negative is expected on this front some of these midcap PSU banks are looking good.

We actually like some of these structurally good quality ones such as Corporation Bank , Indian Bank at this point of time. Also, the other thing that we are looking at is that, where the asset quality is expected to improve going forward. From that point of view, we actually, like Syndicate Bank which has been very conservative in the last couple of years, so that is another pick.

Q: Can you tell us about IOB the one bank that you have chosen? Also you were speaking about the overall banking space - do you think a lot of the negatives have already been priced in - a lot of the macro negatives and also will the banks maintain the kind of credit growth that they have targeted for this fiscal?

A: Indian Overseas Bank is another bank which has actually seen major asset quality pressure in the last couple of few quarters. Going forward, things will improve for this bank. In terms of earnings growth trajectory for this bank is expected to be quite strong. It is trading at a very attractive valuations. This is another stock where we see some amount of upside in the midcap space.

Looking at the overall sector definitely, we see some of the headwinds that were really affecting the sector in the past couple of months easing out. One of the things is, the interest rates look to have peaked out primarily because if you see on the fiscal deficit front the market borrowing is going to be definitely much more manageable going into FY12.

Secondly, a lot of the insurance money is coming into debt instead of equity now, so that is also easing up pressures to an extent. With interest rates looking to have peaked out and with the stock have been corrected so much. Now that we are looking at FY13 numbers as well stocks are looking quite attractively prices. There is definitely upside in several of the stocks in the banking space.

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