More positive on PSU banks than new private banks: Hemindra Hazari, Nirmal Bang Institutional Equities

In an interview with ET Now, Hemindra Hazari of Nirmal Bang Institutional Equities shares his outlook on the banking sector. Excerpts:

ET Now: What do you make of all that is happening in the banking space?

Hemindra Hazari: At the moment you must understand that there are some headwinds against banks, namely asset quality, as you see the IIP numbers what have come out and what the broad economic indicators indicated that things at the ground are getting worse. Added to that you have a lot of restructuring, NPAs are on the rise and the spike in interest rates earlier.

We had a belief that they would impact margins and the cost of funds for banks, plus you have a lot of treasury losses also which you have seen from IndusInd Bank. So you have all these broad headwinds coming in for banks.

On top of that there was an expectation that probably inflation would come down, but that did not happen. So there is the added pressure which the banking stocks are facing.

ET Now: To your mind, which are the banks that you would recommend investing in at the current levels or maybe at slightly lower levels?

Hemindra Hazari: We are in the new private sector banks. We are hardly pushing any of those banks. We are pushing ICICI Bank, but amongst the government banks we are not pushing State Bank of India but banks like Bank of Baroda.

We are pushing smaller banks like Syndicate Bank, Bank of Maharashtra and even banks like Bank of India. But these are basically based on valuations because the stocks have really been hammered down to levels where we really believe that there is limited downside.