After the government announced on Monday that it will be borrowing Rs 2.88 lakh crore in April-September period for FY19, lesser than previous occasions, a bond rally was witnessed, thereby pushing prices of PSU banks higher as well.
Financial stocks, particularly PSU banks, rose with Nifty PSU Bank index rising over 1 percent. While this is good news for such entities, experts at Aditya Birla Sun Life believe that challenges for PSU banks do remain.
“While borrowing programme will limit the mark-to-market losses, there are real challenges with respect to capital required to provide for non-performing assets (NPAs),” Mahesh Patil, Co-Chief Investment Officer, Aditya Birla Sun Life AMC told CNBC-TV18 in an interview.
So, how should an investor approach PSU banks? Patil believes that there is some merit in some stocks which are focussed on improving return on assets.
Speaking on SIP flows’ condition, especially after the market’s fall, he said that the book was still growing, but the rate was moderated.
“Retail investors are showing slight concern with market correction and going forward we may see 20 percent drop in flows compared to last 6-month average," Patil told the channel.
In the overall financials space, he expects good growth in rural-facing non-banking financial companies (NBFCs).
Among metals, he believes that there is good value after the correction in metal space and he does not see risk to these companies next year.
In case of infrastructure players, barring power sector, it is looking better. Road and construction companies are seeing good growth on order flows, he added.