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 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