Positive on Axis Bank; improvement in credit offtake, asset quality hold the key: Mayuresh Joshi

In a chat with ET Now, Mayuresh Joshi, Fund Manager, Angel Broking, shares his view on Axis Bank.

ET Now: What should investors do with Axis Bank, given that the stock is struggling between in its 50-100 daily moving averages (DMAs). What are the expectations from the private sector lender this earnings season? It seems that the market is reading something that could go fundamentally wrong with the lender. What is your view?

Mayuresh Joshi: We have been extremely optimistic on Axis Bank for the past two to three years and would continue to remain so.
The entire Axis Bank story is all about how it probably translate its balance sheet strength into operating leverage benefits. I am very confident that they would probably be able to do that.

The strong CASA and the kind of capital adequacy ratio that Axis Bank commands make us believe that the return ratios such as return on assets (RoA) and return on equity (RoE) will be very strong over the next couple of years.

The structural rate cuts should have a positive impact on Axis Bank's cost of funding. It should protect net interest margins (NIMs).

In addition, a pick up in credit offtake and a stable asset quality would be key triggers that will probably lift Axis Bank stock further higher.

With the kind of branch strength that it probably has, the operating leverage should be much higher than other smaller private sector banks. We are expecting anywhere between 50 to 75 basis points drop in the policy rate over the next six to nine months. Hence, we remain extremely bullish on Axis Bank stock from a couple of years' perspective.