Positive on private lenders; prefer SBI among PSBs: Mayuresh Joshi

In a chat with ET Now, Mayuresh Joshi, Fund Manager, Angel Broking, shares his top investment ideas.

ET Now: What is your sense on the entire rally we have seen on the PSU banking counters? Does it seem like it was just a trading move post the recapitalisation news?

Mayuresh Joshi: Clearly, PSU banks reacted very sharply after the recapitalisation news, but our take has been that the internal flows are still expected to be muted over the next few quarters.

Banks have consciously gone slow on their credit growth and are single-mindedly focusing on recoveries and asset quality. If the capex cycle does not take a U-turn over the next few months, the stressed assets in iron and steel real estate portfolio, sugar and infrastructure portfolios, the elongated working capital requirements would take a toll in terms of how the asset quality pans out.

Our take is that the internal flows will still be weak for a lot of these PSU banks. But valuations look extremely attractive for the whole host of PUS banks. State Bank of India is something that we will still be comfortable with. Any decline onto the stock becomes a good opportunity. The private banking space is something that we will still continue to remain optimistic about. Three factors including capital adequacy, asset quality and the simple strength of branch network, will probably help the banks see ROE expansion.