Thumbs up to Gyan Sangam; like SBI, BoB: IDBI Capital

A: From the government side, the people who have attended the entire meeting indicate the importance or the kind of significance from the government that they are actually emphasizing on. This has been a single platform where all the PSU banks and the government agencies met together and started deciding more about how autonomy to the PSU banks can abdicated as well as the recoveries, which are large dues and how a more of the cannibalisation effect can be reduced or how more effectively PSU banks can function together - that is something that has been discussed upon.

We definitely remain positive on the entire stance and we feel this is a positive momentum which the government has started and the benefit should come out if things play equally.

Q: What is your call now on PSU banks? We have seen big outperformance in the second half of last calendar. Do you think it's time to book profits or would you advise staying invested in PSU banks?

A: We remain bullish on PSU banks specifically on banks like State Bank of India (SBI) or Bank of Baroda (BOB). The stocks have outperformed major indices in the last six months, specifically since the formation of the new government. But with gross domestic product (GDP) improving, the economic turnaround happening, PSU banks are likely to be the major beneficiaries out of it, so it's not where we say the party is over; the probability is that it might move a little higher.

If the economy turnaround happens as planned or in the manner the government is hoping for, there is little more space left for the PSU banks. We remain bullish rather than started getting worried about it.

Q: From the Gyan Sangam if there was one key reform which was spoken about and which is possibly implemented going forward, which one would that be for you to possible become incrementally positive or incrementally bullish on the PSU banking space.

A: A mechanism is required to strengthen the recoveries jointly for all the PSU banks together, they have to take a stance together and start focusing on the recoveries because there is a large amount of dues already there whether in the form of non-performing assets (NPAs) or even in the form of return of accounts. So that can boost up the profitability of all these banks or strengthen the baseline or even the adequacy for the banks very largely. So that is one thing we are specifically looking out for, how this thing works out for and how together they can start focusing on the recoveries. That would be the key are that one has to look for at least in the coming couple of quarters.

Q: Last week we had the news about the CMD post being divided between the Chairman and the CEO and MD. What is your view on that? Do you think that's a good enough move and would you expect something similar from now on?

A: It's a good move that a positive momentum that has happened because it definitely gives more autonomy to the banks and segregation of responsibilities or duties is always beneficial for a bank in general.

This anyhow is the culture in the private sector banks and if this is happening in PSU bank is beneficial and in a long run this will give advantage to the banks. This is in follow-up to PJ Nayak Committee recommendations and we think if more of recommendations has been accepted, this would beneficial for the banks overall.Q: What is your top PSU banking picks right now?

A: It would be SBI followed by BoB and Punjab National Bank (PNB).

Q: From the broader market, not the Nifty PSU banks?

A: You can play around with any midcap PSU names which you see a turnaround as probable or where the new management has roped in but that will take little longer time because the new management has to take steps, so we will stick to the large PSU names for now and then how the scenario changes, we will go for the midsize PSUs in that case.

Disclosures: I or my company does not have any specific exposure to any of the stocks that we have discussed here.