Axis Bank a safe bet: Vaibhav Agrawal

Vaibhav Agrawal, VP Research, Banking, Angel Broking, in a chat with ET Now, shares views on banking stocks.

So what is it that you are recommending right now, let’s talk about 3 or 4 stocks that you are keenly tracking right now?

Right now if you look at the overall banking space, definitely from the external point of view, there are certain amount of headwinds to earnings. Because of rising interest rates, we would see low earnings visibility for many of these smaller banks and at the same time, asset quality pressures could also re-emerge in the next couple of quarters. Therefore we are right now really preferring those banks who have a good amount of earnings visibility in spite of the headwinds because of consistent expansion in their branch networks, strong capital adequacy, good visibility for balance sheet growth and at the same time where valuations are reasonable. So really at this point, Axis Bank fits the bill quite well. It is trading at a huge discount of about 40% to HDFC Bank now and in terms of earnings visibility, we still do see at least 20% to 23% CAGR for the next couple of years. Even in FY11, they have increased the branch network by almost 40%. They are going strong on expansion. So company specific if you go really earnings visibility is strong and valuations are reasonable here.