Investor Rakesh Jhunjhunwala (Illustration: Moneycontrol)
Big bull Rakesh Jhunjhunwala expects PSU banking stocks to lead economic recovery post-pandemic amid a rise in credit growth. In an interview with Moneycontrol’s Nisha Poddar, Jhunjhunwala said he prefers Canara Bank and State Bank of India (SBI) from the space.
“The credit growth which has been 6-7 percent could go up to 15 percent. I see India growing in double-digit this year, and then next year the growth rate could be 6-10 percent, said the ace investor often dubbed India's Warren Buffett.
According to Jhunjhunwala, credit growth will pick up and public sector banks are well-provisioned and they also have deposit gathering ability.
Both Canara Bank and SBI reported strong earnings for the March 2021 quarter.
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Canara Bank reported a profit of Rs 1011 crore in Q4, against a loss of Rs 3259 crore reported in the year-ago period amid a fall in provisions.
LKP Securities has a buy rating on Canara Bank with a target price of Rs 190. The bank remains upbeat on recovery from lumpy corporates in the next few quarters.
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The brokerage firm believes that the government may infuse capital via recapitalisation, and the bank may raise capital from stake sales of AMC, HFC, and Insurance.
Meanwhile, the results of SBI surprised the Street. Most brokerage firms raised their target price for the public sector lender after it reported an 80 percent YoY rise in the net profit supported by a jump in net interest income, other income, and stable asset quality.
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Goldman Sachs maintained its buy rating on SBI and raised the target to Rs 648 from Rs 585 earlier post Q4 results. Broking house increased earnings by 6%/11% for FY22-23. It was positively surprised in FY21 on many fronts.
Credit Suisse, in a strategy note earlier this week, highlighted that it is overweight on banks (private banks & SBI), as it believes they are the best plays on the expectation of better-than-consensus expectation of medium-term growth.
Jhunjhunwala also highlighted that State Banks of India is a very well-run bank, and if somebody wants to borrow Rs 5000 crore, it is the bank to go to.
“They are doing very well in the retail space, and their subsidiaries are doing extremely well. Nobody can match their distribution for insurance, retail or mutual funds,” explains Jhunjhunwala.
Catch the full interview with Rakesh Jhunjhunwala hereDisclaimer: 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.