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Bullish on banking stocks, Hiren Ved says market corrections are over

Alchemy Capital Management Chief Investment Officer says the banking space pecking order has changed from what it was before the coronavirus outbreak

July 27, 2022 / 01:40 PM IST
 
 
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Hiren Ved, CEO, Director and CIO, Alchemy Capital Management, thinks the correction seen in the May-June period is over and Indian companies seem to have done well on the earnings front despite the odds.

“We are constructive about the market. The single reason for that is despite macro headwinds, earnings in India have held up reasonably well. For the next two years, Nifty can still deliver mid-teen earnings growth. That is the reason Indian markets have been fairly resilient,” he told CNBC-TV18 in an interview.

The biggest driver of the market over the last month has been a rally in banking and financial services stocks. They have a large weight—40 percent—in the Nifty as well as the Sensex. After months of sluggishness, these stocks have finally seen some buying, pushing up the indices.

The Nifty has rallied nearly 9 percent since hitting lows in June. The Nifty Bank index is up 14 percent from its 52-week low hit in June 2022.

“Financials should lead the market hereon. Credit growth has moved up sharply. Net interest margins are expanding for most of the banks,” said Ved, adding the largest delta of earnings within Nifty would be in that space.

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He said that going deeper into the banking space, the pecking order was changing from what it was before the coronavirus pandemic.

“Even within the banking space, leadership is clearly changing. ICICI Bank clearly leads both HDFC Bank and Kotak Bank–both in terms of consistency of performance across parameters and growth,” Ved said.

His thoughts echo those of several analysts who believe ICICI Bank is the best investment in the banking space. The stock is one of the few stocks on which every analyst has a “buy” rating, as per Bloomberg data.

Says no to Tata Steel

Tata Steel beat analyst expectations in its earnings announcement on July 25 but Ved is not a fan of such stocks. It is difficult to make money from cyclical names in the long term, he said.

“There are better structural plays at this time where there is clear visibility in growth and not that kind of volatility,” he said.

Tata Steel was one of the best-performing stocks in the calendar year 2021, riding on huge demand and rising international prices. However, this year, it is among the biggest losers in the Nifty pack, down about 40 percent.

Also Read: Can the recession in the US, Europe catalyse adverse ‘chemical’ reactions on D-St?

Ved identified four structural growth areas—engineering, research & development (ER&D) software companies, speciality chemicals both across pharma and agro chemicals, consumer discretionary– liquor, QSR and retails, and financials.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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first published: Jul 26, 2022 01:06 pm
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