Don't expect a good valuation for small cap banking stocks: Sonam Udasi, IDBI Capital

In a chat with ET Now, Sonam Udasi, IDBI Capital shares his views on small cap banking stocks.

ET Now: Would you play some of the names like Dhanlaxmi Bank or Federal Bank in hopes of some M&A activity in that small cap banking space?

Sonam Udasi: The better way would be to look at the fundamentals. I will be happy to play Federal Bank simply because the fundamentals are quite robust, things are going fine. In cases like Dhanlaxmi Bank, even if there is potential acquirer, you will not get a valuation for it right now because what you are doing as a bank, there is lot of stress.

So even as shareholders, your only hope is that you will get sold into someone at a discount or not at the correct price. So it will good the acquirer, it may not be so good for the shareholders really. Only in a long run depending on the merger ratio that comes out, so I still say that there are pockets that are looking really interesting. In fact in my view some of the strong banks like HDFC Bank or even a Karur Vysya Bank will continue to trade at a premium and as things move further in finance bill and as insurance subsidiaries are getting listed, some of the private sector banks will get re-rated significantly because of that.