Prefer private sector lenders with higher retail exposure: Girish Pai, Nirmal Bang Institutional Equities

In an interview with ET Now, Girish Pai, Head of Research, Nirmal Bang Institutional Equities, shares his views on markets. Excerpts:

ET Now: Your take on PSU banks ...?

Girish Pai: If you take a top down look on the banking sector, 8-9% of credit growth is a mix of about mid teens or probably a mid teens to high teens kind of retail growth. Corporate credit demand has come off because one of the things driving credit growth has been the fact that the working capital requirements of the refining companies that used to give a lot of business to the banking sector and the fact the capex of steel companies was leading to demand, so all that has actually come off and inflation coming off also impacts credit demand in one sense.

The nominal GDP growth coming down also has an impact in terms of credit demand, so if I recall the numbers, the corporate loan demand is somewhere in the mid single digit territory, so that is a situation. It is worrisome and therefore from a portfolio construction standpoint, one should be largely overweight on the private sector banks over the next few years which have got larger exposure to retail than the ones which have got exposure to corporate.