We continue to be overweight in the PSU banking space: K Ramanathan

In a chat with K Ramanathan, CIO, ING Investment Management talks about the PSU banking sector.


How would the earnings be for the PSU banking lot, the banking results starts tomorrow and are you more constructive on the PSU banking space as a lot?

Yes, we continue to be overweight in the PSU banking space. Our view is not one quarter or one month oriented it is over the next six months to one year.

If you believe that PSU as a space have peaked out, we do expect close to 100 bps repo rate cut over this calendar year so it is not that the bond yield rally is almost done. You still have possibly 50-60 bps more of yield drop although it will pan out over a period of time so that should give your capital gains over the next few quarters.

Also, if clearly the government’s intention as well as the monetary policy intention is to spur growth that surely should lead to some recovery in the troubled sectors like iron and steel and textiles and so on and so forth. So clearly the NPA issues which possibly could again crop up in this quarter may last for a couple of quarters but may not last for the next financial year.

If you see the valuations are clearly supportive, possible bottoming out of NPAs, possible further interest rate reduction apart from the interest rate reduction expected in this month.