Banking shares will do well: Dipan Mehta, member, BSE and NSE

Dipan Mehta, Member BSE and NSE, in a chat with ET Now talks about the banking space.

What do you do with the banking lot? Do you think there is still some more steam left in midcaps, possibly even large cap banking?

The key highlight of the July earnings season was the banking industry where we noticed that private sector banks and public sector banks did exceedingly well - not only in financial terms but also qualitatively. They were able to improve their net interest margins, the NPA provisioning was under control, the costs also were well under control and most of the banks had very decent increases in credit as well.

So now given that kind of a scenario and given that information, that is one sector where we are going to see expectations being built up for good performance over the next 2-3 quarters or so. If you notice, it is one sector where we are seeing upgrades coming in on the earnings front as well.

So my sense is that over the next 2-3 months, banking shares and the banking industry should be the leadership industry and we will see banking shares scale to higher levels and in that respect, investors may be advised to be slightly more overweight on that segment.

The scenario is definitely much better for the banks, environment is improving and it does appear that they will be able to keep the net interest rate margins steady even for 1 or 2 more quarters. The credit growth of course is picking up and valuation wise also, they are pretty reasonable, especially public sector banks. They are perhaps in a single digit or low double digit and private sector banks also have not run up as much so as to justify them to be excessively overvalued.

So the banks will do particularly well. You may see minor sell offs from time to time but these are all opportunities to enter banking sector.