Bullish on banks, pharma says I-Pru MF's S Naren

S Naren, CIO of ICICI Prudential

“There is nothing wrong with banks at this point in time,” said S. Naren, Chief Investment Officer at ICICI Prudential Mutual Fund, in a conversation with Moneycontrol.

Banking stocks were the rage for much of 2023 as the sector benefitted from a strong credit cycle and better net interest margin during the initial period of rising interest rates. However, the struggle to raise low cost deposits and the plateauing of credit demand has tempered the sentiment for banking stocks over the last couple of quarters.

In 2024 so far, the Nifty Bank index has risen 5.8 percent, compared to a 12.12 percent rise in the 50-share Nifty index.

“The banking sector has underperformed in recent years, but as firm believers in mean reversion, we see potential in this sector moving forward,” Naren added.

Naren is also optimistic about the pharmaceutical sector, citing a favourable U.S. generic drug cycle and reasonable valuations . Life insurance is another sector where Naren currently sees promise.

Even with a slew of announcements indirectly benefiting the FMCG segment, Naren said that he is not so sure about the segment emerging as a theme post-budget because the valuations in the segment are pretty expensive right now.

On the hike in Securities Transaction Tax (STT) on derivative trades, Naren said that if the announcement was so significant, the market would have reacted in a different way today.

Finance Minister Nirmala Sitharaman during her Budget 2024 sought to curb the incessantly rising futures & options (F&O) trading in India by proposing to hike the securities transaction tax (STT) on Futures & Options trading.

The STT on sale of equity options will now be levied at 0.1 percent of the option premium, up from 0.0625 percent; and at the rate of 0.02 percent on sale of futures as against 0.0125 percent now.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management.