IIP numbers signal return of investment cycle: Rajesh Jain

Rajesh Jain, Market Strategist in an interview to ET NOW said that the IIP numbers are very clearly signalling a return of the investment cycle, which is not driven by the government and with the return of inflation, there will be a greater credit demand. So, the banking space, you will have to essentially play it more on fundamentals rather than momentum driver like as you mentioned the recapitalisation expectations from the government.

Now most of these banks are looking at recapitalisation, the fact that they will get it is a good thing but for the banks that have not been able to get this kind of fund, is it a substantial blow on their books and do you think that the banks that have not been able to get this recapitalisation will face a bit of problem going forward?

There will be some perception issue vis-à-vis the momentum players in the market but essentially if you are buying banking for a non momentum reason, then you are going to be looking at it for a recovery in the credit off-take numbers. Now essentially that's going to come despite the hike in the benchmark rates because the economy is looking up.

The IIP numbers are very clearly signalling a return of the investment cycle, which is not driven by the government and with the return of inflation, there will be a greater credit demand, so the banking space, you will have to essentially play it more on fundamentals rather than momentum driver like as you mentioned the recapitalisation expectations from the government.

If the bank has good management and recapitalisation is deferred to say by a year or so and/or also if it is allowed to pursue alternatives like follow-through offer or an initial offering, then again I would not worry too much about it.