Markets look at diluting exposure to large-cap banks: Prakash Diwan

In a chat with ET Now, Prakash Diwan, Head–Institutional Clients Group, Asit C Mehta Investment Intermediates Ltd, talks about banking stocks.

ET Now: But on the flipside even though large-cap private banking stocks have come out with good numbers, markets are not rewarding those numbers. HDFC Bank numbers were strong, ING Vysya Bank numbers were strong and IndusInd Bank also came out with good set of numbers?

Prakash Diwan: I believe primarily the enthusiasm or optimism has not started building on these numbers because going forward it is going to be difficult. They have managed this difficult phase of the first quarter FY12 fairly decently, passed on some of the costs. It is too early to save with such huge balance sheet, whether any interest rate hike impact is going to kind of, the cost of funds impact is going to be so negligible.

So we have seen some muted impact dilution in NIMs and all but going forward it could only get much more stressful for the larger banks whereas the private sector banks, the smaller ones, the likes of Yes, IndusInd, they could probably again be much more smarter in terms of getting into segments where they can pass on the costs much faster. The wholesale cost of funds for them also has not kind of really been as dramatically high as we expected, so the street is possibly looking at diluting some exposure to the large cap banks and making sure that they are fairly divided across the smaller caps also.