Will give PSU banks two more quarters: Prakash Diwan

In a chat with ET Now, Prakash Diwan, Director - Altamount Capital Management, shares his views on the banking space. Excerpts:

ET Now: Would you be a buyer in PSU banks at the sold out levels given what is happening with the rates cycle or would you think that what they are going through in terms of asset quality stress perhaps the situation is still not clear and you would not want to get into that uncertainty?

Prakash Diwan: It is quite certain that they would need more time to repair their balance sheets, especially if the larger banks succumb to slippages from restructured assets to NPAs. I do not think the smaller ones will remain unscathed and I would really want to wait to get into those but amongst the private sector banks, they start looking much better. Axis for instance is emerging as a clear lead in this whole realignment of sorts vis-à-vis the restructured assets. My sense is that the differential between Axis and some of the other PSU banks and smaller private sector banks will even widen further so you could probably be in the same space as an HDFC, Kotak, ICICI. But to answer your question most specifically, I would still give them two quarters irrespective of how interest rates behave.