SBI, PNB and BoB make a complete PSB basket for long-term investors: Parag Thakkar

In an interview with ET Now, Parag Thakkar, Head Institutional Sales, HDFC Securities, shares his view on PSU banks.

ET Now: What is your view on banking stocks? Would people be enthused to buy stocks of only private sector banks? Is there any PSU bank that you wish to recommend?

Parag Thakkar: We continue to believe that SBI is the best way to play the PSU banking theme.

Through this PSU bank, what you are actually playing is the rate cut cycle; you would also be betting on a recovery in asset quality with this PSU banking stock. Right now, nobody is talking about a recovery in asset quality beyond the next three quarters.

One has to have a long-term investors to buy into these PSU banks.

SBI's third quarter results were relatively stable; the asset quality and the guidance for Q4 was not that bad. Of course, there remains an overhang due to the Rs 12,000-13,000 crore QIP, which has kept the stock slightly under pressure. This is because, institutional investors would like to subscribe into that offer rather than buying the stock from the secondary market. I believe, the trigger has been priced in at current levels.

ET Now: So, you are bullish on SBI, but what about the rest the gang?

Parag Thakkar: Banks such as Bank of Baroda (BoB) and Punjab National Bank (PNB) are well-capitalised; they (the two scrips) have also dropped significantly. You may also find value buying opportunity over these counters, but you have to bear in mind that your horizon would be of long-term in nature and that nothing would change drastically in the next two-three quarters.

ET Now: Excluding SBI, which one would you like the most?

Parag Thakkar: I would like to say that and SBI, BOB and PNB is a complete basket. With Rs 15,00,000 crore worth of loan book, SBI is a clear beneficiary of interest rate going downward. In addition, you have big insurance business which can grow immensely , given the fact that SBI has around 16,00 branches.

SBI has a very good AMC business too. Hence, it is a complete play on India. Therefore, when you have a such strong government, a supportive and matured RBI, you are in safe hands. Meanwhile, global liquidity is good so far. All these factors actually go in favour of company like SBI apart from the near-term hiccups.