Prefer DCB, Yes Bank, ICICI Bank: Dipan Mehta

Dipan Mehta, Member, BSE and NSE is of the view that one can prefer Development Credit Bank (DCB), Yes Bank  and ICICI Bank. These banks offer the best returns for investors within that particular sector.

Mehta told CNBC-TV18, “Considering that inflation has come off and there is widespread optimism and hope that the  RBI will cut interest rates more aggressively than what we thought maybe a fortnight ago or so. So given that kind of  an assumption, banks are the major beneficiaries of interest rate cuts, at the same time the banking results, at lease  the first few which have come have been very impressive as far as the private sector banks are concerned. So both  these factors in conjunction are acting as a good trigger for the banking sector, especially private sector banks.”
He further added, “My sense is that if you look at the entire universe of stocks, it is the private sector banks where we  are seeing secular growth and very decent track record and the benefits of compounding coming through and yet  valuations even at these levels are not out of whack, they are pretty reasonable and if the private sector banks  continue to perform the way they have been, especially the way they have managed their NPAs then my sense is that  more and more money will chase these stocks and we could see the private sector banks taking leadership position.”
“PSU banks could be a good trading bet if the interest rates actually flow through and this earnings season is  important from the PSU banks’ point of view to assess exactly how their NPAs are shaping up and what provisions are  being made and I think that these PSU banks become more attractive if one is convinced that the NPA problem is well  behind them.”
“In conclusion one would have to say that given what developments have taken place between last week and early this  week, one should get overweight on the banking sector. We are very positive on private sector banks.”
“Development Credit Bank (DCB) also came up with a decent set of numbers and that is a very interesting midcap  private sector bank and then there is Yes Bank which also is one of our favourites. Third would be ICICI Bank.  Investors could watch out for that bank and results could be better than the street expectations. So considering the  kind of performance, track record and the valuation these three banks offer the best returns for investors within that  particular sector.”