Private sector banks facing asset quality headwinds: Kotak Securities

In a chat with ET Now, Shashank Khade, Executive Vice President-Portfolio Management Services, Kotak Securities, shares his views on banking sector.

ET Now: What is the call on the banking pack? Besides the last 2-day moves, what do you think is plaguing the whole sector at this point in time?

Shashank Khade: It is actually quite simple, it is asset quality and asset quality. In fact, the PSU banks have faced the brunt of that in the last 3 to 4 quarters now. Private sector banks selectively have been facing headwinds right now but that is the sort of ghost which is haunting the banks and unless we completely overcome this asset quality related issue or finally come to a point where we have completely discounted this particular asset quality related issue.

The banks will not really show you a strong trend of an up move. There were signs of certain banks like ICICI Bank actually continuing to do well but then came this coal related issue where there have been certain advances to certain companies, which have started haunting banks like ICICI Bank as well. So asset quality, because of the lending to infrastructure has been a big issue for banks and unless the infrastructure sector per se takes off.

Government does something to put life into these infrastructure sectors, approval starts coming faster, we still will be having issues about asset quality in banks. Of course, there will be a point in time where the market will come and say that we have discounted the worst. Now, things will only improve from here and that is when the banks will bottom out and start moving up.