IndusInd Bank top pick; sell Syndicate Bank: Rahul Arora

Rahul Arora, CEO at Nirmal Bang Institutional Equities told CNBC-TV18, "A lot of the concerns that people were expecting in IndusInd Bank on the commercial vehicle (CV) side of the business which was nearly about 35-40 percent of their portfolio, they have managed to ride over that pretty well. If you are taking a call that CV cycle is going to revive from here, that has been the overhang or sort of a concern area; not necessarily an overhang that people have had on IndusInd and it has reflected in the way for example the Ashok Leyland stock has done. So, that is a company that we like."

"It is doing about 14-15 percent return on equities (RoEs) and we are expecting that to go to about 18-19 percent. You are getting it at about 1.9 times return on assets (RoA). I don’t think there are any concerns as such. Generally, even if you look at the capitalisation of the bank and the kind of outlook it has by way of fund raising, I don’t think there are too many concerns that you have over there. It is definitely a richly valued bank but historically you have seen that when fund raisings take place in banks with higher RoAs the multiples keep expanding and we have done a study on that," he added.

"On Syndicate Bank I have some concerns with the fact that their capital adequacy ratio is just about 10 percent or thereabouts and tier-I is just about 7-7.5 percent. In the backdrop of all that has happened offlate in the bank the incremental upside if it at all will be sort of capped their loan book is not the best at this point in time. If you look at the asset quality the results over the two or three quarters have thoroughly disappointed us."

"When we had initiated on this company about a couple of years back, we did have a positive tilt but earnings have consistently disappointed us and unfortunately for them they had one of their managing directors have a court case not too long back. So, IndusInd would remain our top private sector banking pick at this point in time and Syndicate would remain a sell," he said.