Wait and watch call on banking sector: Arun Khurana

In an interview to ET Now, Arun Khurana, UTI AMC gives outlook on the banking sector.

Given that we are now entering into a pause on the rate cycle, what do you expect over the next six months from the banking sector?

Banking sector seems to be pretty challengingly poised. The current set of numbers has been a surprise pack. A fair amount of PSU banks have given good results and a larger amount of banks again have disappointed in terms of results.

Nevertheless for the last month-and-a-half, the prices of most of the PSU banks as well as the private sector banks have ran up in anticipation of a good pack of results probably in line with the improving macro in terms of the fact that the spate of interest rate hikes would be stopped for one.

Secondly given the fact that consumption story runs quite healthily, so it is going to be quite a challenge in terms of predicting what’s going to happen over the next six months to the banking sector but I believe that over the next couple of years, banking sector is likely to do very well.

The challenges that the banking sector is facing right now is one, the liquidity challenging, which the economy is facing right now in terms of dwindling FII flows, FDI inflows and dwindling dollars too in terms of about $25 billion of extra dollars needed to import the same quantity of oil. So we have a liquidity shock of about 2 lakh crores odd, which we need to find an answer to, to what extent it is going to be financed.