NPA situation in banks poor, aviodance advised: Mehraboon Irani

In a chat with ET Now, Mehraboon Irani, Principal & Head-Private Client Group Business, Nirmal Bang Securities shares his views on the banking pack. Excerpts:

ET Now: What is your call on the banking pack?

Mehraboon Irani: On your query on Axis Bank, I will honestly tell you that it is a wastage of time trying to track how the banks stocks have performed. I do not expect the bank stocks to do anything on the whole, in the next six months. You find their gross NPAs and net NPAs moving up and you see the provisioning coming down. They are at lofty valuations right now and may be they are trying to protect their valuations at the moment, because where the stakeholders, whom we have to answer are is the question. So the coverage ratio, which was very high has come down.

Until we find the NPAs possibly plateauing and not going up any further and showing signs of decline, I do not think there is too much to look forward to in terms of trying to make money in banking stocks. So may be from a trading angle these stocks may give some returns, but form a investment angle, for the next six months I personally feel it will be a wastage of time, because the asset quality still remains under a cloud for most of the banks.

Also going ahead, the RBI is going to quite strongly, ask banks to work on trying to reduce return on non-performing assets and furthermore, over the next three years we will see a whole lot of banks requiring a lot of capital to protect themselves and to take care of themselves. So all said and done, banks on the whole, are on a weak wicket and numbers here and there, I do not think it make too much of a difference to the market cap of these banks right now.