S Krishna Kumar said that the bank recap step changed the framework with which PSU banks will be seen. He expects cement, infra stocks to get better as well.
Rally in PSU banks due to the recap plan announced by the government Tuesday lifted markets to fresh record highs today. S Krishna Kumar, CIO Equity at Sundaram Mutual Fund believes the recapitalisation plan is a long-awaited step.
“They had to take the bull by the horns and it has taken the massive step to put this capital. This changes the framework with which an investor would look at banking and financial space. Structurally, they are back in the game,” S Krishna Kumar, CIO Equity, Sundaram Mutual Fund told CNBC-TV18 in an interview, adding that the risk profile of PSU banks will get a lot better.
The government on Tuesday announced Rs 2.11 lakh crore recapitalisation plan for state-owned banks and approved mega infrastructure projects worth Rs 6.92 lakh crore as part of a broad plan to create thousands of new jobs, raise income, boost investment and quicken growth in the broader economy.
Finance minister Arun Jaitley said that the government will launch an umbrella road building programme to de-bottleneck the sector. The program will cover 83,677 km of roads and will involve a capital expenditure of Rs 6.92 lakhs crore over the next 5 years.
In fact, over the next couple of years, as they get their act together, credit growth could also go into double digits, he told the channel.
The rally in PSU banks led to a negative impact on NBFCs and private banks. Kumar said the fund house has stayed overweight on the NBFC and private banks' sector for the past eight years or so, which gave good returns. The bank recap plan is definitely a big reset, and there could be more balancing as you get into corporate banks at this point, he told the channel.
Speaking on the infra push announcements, Kumar said the government spending has been good in the past three years. In fact, this is an incremental step. He expects infra space and cement to be strong beneficiaries“We have been playing domestic story through infra and cement players, among others. This would not alter the portfolio balance right now and we are already significantly overweight,” he told the channel.