Suggest to go contrarian on PSU bank stocks: Anand Tandon

In a chat with ET Now, Anand Tandon, Independent Analyst, shares his views on markets. Excerpts:

ET Now: How would you approach PSU banks, would you look at a contrarian perhaps bullish stance on the space right now?

Anand Tandon: Well certainly. The fact of the matter is that public sector banks have large industrial exposure as oppose to private sector banks. If you are going to be bullish on the Indian economy on the basis that there will be a revival in terms of the industry, there is no reason to assume that that will not get reflected in the banking books.

There are several public sector banks today which are operating at 0.5 book value on the assumption that the book fully does not reflect all the kind of slippages. But the fact of the matter is that these companies are not likely to shut down and go away.

On a longer term basis, one could argue that growth will be slower because of lack of capital and therefore constraints in terms of lending but it also means as the portfolio turns around and the book becomes a little cleaner, the fact is that you will get the valuation gap reducing. If you are looking for growth that is not the best place to be. So it is a balanced of what one is looking for. From a purely valuation point of view, I agree with you. You are likely to get better returns from public sector banks here on.