Nifty floor near 6800; banks not going bankrupt: Kotak's Prasad

The mid-point of India’s historical trading band (12.5-16.5 times 12-month rolling-forward price earning multiple) may be a good place for the market to find some footing, says Sanjeev Prasad, Senior Executive Director & Co Head (Strategy), Kotak Institutional Equities, in a note to clients.He feels many stocks with reasonably visible earnings/book are trading at inexpensive valuations. "Global conditions may result in overshoot in the short term, but we expect several stocks to be meaningfully higher versus current levels over the next 9-12 months," he writes.According to Prasad, a 14.5 PE multiple on FY2017 estimated Nifty earnings per share of Rs 470 “will put a floor at around 6,800, (on the Nifty)”.Also, he feels the panic over the huge losses in public sector banks arising from higher provisions may be overdone.Excerpts from Prasad’s note:“Our simplistic exercise shows that the capital requirement will not exceed Rs 1 trillion (Rs 1 lakh crore) for the Indian banking system even if (1) impaired assets go up to over 15 percent of total loans (11.3% as of September 30, 2015), (2) write-offs are made today and (3) there is no further contribution from pre-provisioning operating profits.We believe that loss given default is unlikely to exceed 30 percent in the case of most bad loans.”