No room left for further upside in PSU banks: Gaurav Mehta

In a chat with ET Now, Gaurav Mehta, VP - Institutional Equities, Ambit Capital, shares his view on whether news regarding diluting stakes in insurance arms could lift stocks of PSU banks.

ET Now: Would you like to comment on the news regarding State Bank of India (SBI) and its insurance arm? SBI is looking to to dilute its stake to 51 per cent from 74 per cent at present. Do you think that given the business and the concerns haunting PSU banks have,this news will be a bit of short in arm for SBI?

Gaurav Mehta: Unfortunately, I would not be in a position to comment specifically on this (SBI) stock, but you will keep on hearing news, suggesting banks dilutinh stakes in their insurance arms. Having said that, we believe that present valuations are adequately factoring in any upsides from dilution of insurance arms.

Given the structural issues, the recovery in the banking sector already been delayed; credit growth is hardly reviving.

Put together, given that we have already had a decent rally in these banks over the last 12-15 months, we do not think that there is much room left for further upside in the banking stocks from current levels. From that point of view, PSU banks, as a basket, still remain an 'avoid' for us, irrespective of the news flow that you get in from on insurance front.