Corporate banks can be a play for next 2-3 years: Gautam Shroff, Edelweiss Securities

ETF money has provided a silver lining for Indian markets in 2019. We have to see how it takes us forward, Gautam Shroff, Senior V-P and head, sales trading, Edelweiss Securities, tells ET Now.

Edited excerpts:

Is the market giving you confidence that in 2019 you will be able to sail through?

2019 began on a good note. Given that the volatility of 2018 is over and ETF money has proved to be a silver lining. India has got the lion’s share of the ETF money that has come in the last one month. While $6.5 billion ETF money has come to emerging markets, India has got about $2.23 billion in the last 30 days. That augurs very well for us and we have to watch how ETF money takes us forward.

What is this excitement about buying wholesale banks?


I agree that this has now become a consensus view for some time and we want to wait out for the numbers. The price action has happened and now the results have to be displayed. We will wait and watch. There is deep value in corporate banks but this is not a play for this year. This is a play for the next two, three years given that in the last 7-8 years, these banks went nowhere and are really garnering market share. The change in management has been welcomed by the street.

Do you have a view on Praj Industries? The stock has already scaled up to its 10-year high, but considering it has just been a sleepy ride up until last three months, can one still buy into this stock?

Probably the change in management with a very credible management coming on board gives us a lot of comfort but I would not buy in this euphoria when the stock has already moved 15%. Maybe I would wait for some corrections and add. This is not a small play and it has to be slightly more structural for probably three to six years.

If I say Eicher and just pause, how will you react?

We are finding some value and of late in the last few days we have seen some buyers there. I do not want to say the worst is over but yes, it is an institution that has been built and will come back. They are very competitive in nature so at some point in time it should bottom out somewhere near here.

Post the merger deal, why has Bandhan come down and Gruh come crashing down?

Gruh was always richly valued and people and especially institutions were always sceptical of the rich valuations that Gruh traded at but once the event has played out, usually they correct a little bit. I would not read too much into Gruh falling because I think the delivery mark there on those names has not been much. It is slightly more speculative in nature and basically sell on news of what happened with Gruh.

Everyone is bullish on wholesale banks. It is a consensus view, but what about retail banks? Between HDFC Bank and ICICI Bank, which one would you buy for the next two years?

For some time, we saw a trade going on in richly priced banks. Price to books were being trimmed and these corporate banks were being bought into. All the fresh money that we saw coming into the market was going towards corporate banks. I would not rule out that people have trimmed a little bit of the richly priced banks, but that is not over and out.

They will still grow 25-30% easily. Suppose I want to deploy money for about a year, I would stick to an HDFC Bank because I think it will continue to grow and if I have to deploy that money for about two to three years, then I would go with ICICI Bank.

Are markets likely to get nervous before there’s change of guard at HDFC Bank? By October 2019, the new successor would be announced. Is that the biggest risk?

It will be a question on many people’s mind but it does not worry us at all. HDFC Bank is what it is today because of the processes that they have created. Given that the structure, the presence and the way the leaders have created the bank, I would not worry too much on that count.