Avoid public sector banking stocks: Phani Sekhar

Excerpts from Your Stocks on CNBC-TV18 Watch the full show » Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

Avoid public sector banking stocks, says Phani Sekhar , Angel Broking.

Sekhar told CNBC-TV18, "I don't think it's a very smart idea to take on mergers in the public sector banking space because we have seen such situations come in so many times in the past and nothing much has materialized. Even if one takes a look on the standalone basis I don't think
Dena Bank is a best pick because this bank has traditionally got asset quality issues, on valuations also after the recent run up its trading at around 1.1 times adjusted price to book."

He further added, "There are around Rs 300 crore of re-valuations and capital reserves in its equity and add to that another Rs 300 crore of net NPAs and you have around Rs 600 crore of net worth that you need to get. So it's around 1.1 times priced to adjusted book and on a return of assets on 1% on NIM of 2.5% and on net NPA of 1%, I don't think such valuations of PSU like Dena Bank would justify buying at. So if at all one has to look at a public sector bank maybe a Bank of Baroda or Canara Bank would be suggested but in the Banking space a public sector bank can be ignored and one can look at private sector banks."