Ajay Bagga, CEO of Lotus Asset Management is of the view that there over the next one year one should see strong performance in terms of stock prices from the banking sector.

Bagga told CNBC-TV18, "We foresee two things happening which are very favorable to banks; there will be a monetary policy easing in terms of repo rate cuts, there will be reduction in CRR rates to inject liquidity back into the market both are extremely positive for the banks. The banking sell off was overdone, our fund managers were overweight on banking throughout the last six odd months maintaining throughout the sell off that Indian banks did not deserve the kind of beating that they were getting and that’s being borne our banks will recover faster, they are strongly capitalised in India. But for few banks which have huge capital market linkage or where merchant banking revenues formed a large part, the banks that are core banks, we are seeing good strength. There could be one quarter a bit of a correction specially October you could see some come off for the banks because of the interest rate moves but overall we think the trend is positive for banks and over the next one year we should see strong performance in terms of stock prices from the banking sector."

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