“One sector which investors should be cautious of is banking as the best of the numbers are more or less priced in by the markets without any sufficient provisioning,” Sanjiv Bhasin, Executive VP, Markets & Corporate Affairs, IIFL said in an interview with CNBC-TV18.
Banking stocks have been under pressure after the Reserve Bank of India came out with a couple of circulars earlier this week aimed at stricter disclosure of non-performing assets (NPAs).
From FY18 onwards, banks will need to provide new disclosures where the shortfall in provisions as per RBI norms exceeds 15 percent of the reported net income and/or there is 15 percent difference between the reported Gross NPAs and RBI-assessed Gross NPAs.
“The Bank Nifty is trading on very frothy waters, be it valuations or dividend yield. Axis Bank and ICICI Bank are bearing the brunt of the corporate loan, but even on the urban side retail loans seems to have peaked,” said Bhasin.
The best of the numbers are prices with not too much of provisioning in place. “We think that be it Kotak Mahindra Bank or IndusInd Bank have already told you that acquisition is the only way forward as the business on the credit side may have already peaked,” he said.
Commenting on the provisioning, Bhasin recommends investors to be cautious on retail lenders and to a certain extent lenders who are financing commercial vehicles. Investors should turn cautious on HDFC, Kotak and IndusInd Bank.
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