J&K, Bank of Baroda, PNB, SBI top picks in banking sector: Manish Sonthalia

In a chat with ET Now, Manish Sonthalia, Sr. Vice President & Head – Equity Portfolio Management Services, Motilal Oswal Asset Management shares his views on banking sector.

ET Now: What is the sense that you are getting about the banking pack because the kind of rally that we have seen on a consistent basis it clearly seems like there is a shift happening now towards the banking space, are all the asset quality concerns over now or is this again a part of the hope rally playing out?

Manish Sonthalia: Asset quality concerns are well known by the markets, the whole point is incremental deterioration in asset quality is diminishing. Again, it is happening at a smaller pace or lower pace. so the real traction in the banking sector will come post the announcement of the December quarter number and which will begin in the month of January where you will see that the government’s efforts on recovery etc. are playing out well on the asset quality. Private sector banks in any case did not have too much of an asset quality concerns, credit growth is a healthy 15%, NIMs have been protected, M to M losses on account to AFS and HDM have been taken care of by most of the banks in the last quarter. Valuations are still beaten down so there is a lot of upside in the banking sector per se. You can stick to the Axis, the ICICI, HDFC or select public sector names. We continue to like J&K, Bank of Baroda, PNB, these are some of the names which are there on the radar. State Bank of India the ultimate representation of all PSUs per se. It has also rallied from its lows so incrementally the rate of change as far as the deterioration in asset quality concern is slowing down and that you will see in the December quarter numbers.