PSU banks are challenging at current valuation: Vijai Mantri, Pramerica MF

In a chat with ET Now, Vijai Mantri, MD & CEO, Pramerica MF, shares his views on PSU banks.

ET Now: Everyone thought that PSU banks could be a good tactical trade because optically they were looking cheap but looking at the way how NPA concerns have surfaced after the Bhushan Steel case do you think the PSU banks now run the risk of underperforming massively?

Vijai Mantri: The valuation gap between private and PSU banks is disappearing. If it gets recreated, one could own the PSU bank but PSU bank is not one need to buy on the basis of earnings.

NPA concerns, in our opinion, would remain and there are two kind of NPAs which are driven by policy paralysis. NPA can be taken care of, but the other kind of NPA where Indian promoter has committed all kind of challenges as far as corporate governance and dealing with the banks are concerned, it will continue to play havoc with public sector bank.

We do not think that interest rate is going to go down in a hurry in next couple of quarters. So, public sector bank in current valuation would remain little challenge until you see the stocks going down further.