Sectoral bottlenecks will continue to test banking space: Sudip Bandyopadhyay
A capital boost of Rs 6,900 crore is good for the hard-pressed PSBs but the stress will continue, says Sudip Bandyopadhyay.
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ET Now: Does it seem like there is no end to public sector bank woes? How long will it take before we see any meaningful recovery?
Sudip Bandyopadhyay: I would like to make a few points. First, the numbers from PSU banks were much in line with the expectations. The economy has been suffering, be it infrastructure, capital goods, power or road sectors.
Most sectors are facing bottlenecks. The PSBs and some large private sector banks have exposure to these industries/sectors.
Therefore, it is obvious that this stress would be reflected in their balance sheets. I really do not see the stress reducing unless the economy starts recovering. It would take a couple of quarters before we see a clear trend of reversal emerging. We should be prepared the NPAs and related asset quality issues for next couple of quarters, largely in the PSU banking space. Having said that, we are reaching a point where a gradual turnaround in the economy is getting visible. I will be hoping that by end of next quarter, we will start making at least some predictions regarding a concrete timeframe of turnaround.
Sudip Bandyopadhyay: Unfortunately, we are still not positive on the consumption theme. We still see pressure. Same-store sales (SSS) have not really been growing.
There were a lot of expectations that the December quarter, which was marked by festive season, will see a turnaround in same-store sales. Unfortunately, no major growth was seen in same-store sales across industry.
Overall, the food and beverages(F&B) segment has not been doing too good. Most of these players in the segment have derived incremental revenues and sales through addition of outlets. Therefore, we will have to still wait and watch before we can say that things are turning around.
ET Now: There are a bunch of stocks such as Force Motors and Pipavav Defence making news. These are the counters that will likely see companies picking up stakes. How does one play them?
Sudip Bandyopadhyay: Pipavav Defence looks good because the stake sale will be excellent for the company and entry of one of such firms like Mahindra & Mahindra (M&M) augurs well for the company, especially in the light of NDA government's thrust to offer major defence contracts coming to domestic companies. There is a long way to go for these efficient defence production companies. Hence, we continue to remain bullish.
Stock prices have already run up. Only long-term investors can get in these counters. If you are looking them from a short-term perspective, then may be it is not the right time.
ET Now: What's that one firm you watch out in earnings terms among Larsen & Toubro (L&T), State Bank of India (SBI) and Sun Pharmaceuticals?
Sudip Bandyopadhyay: I will watch SBI.
The stressed asset issue of most of the PSU lenders is worsening. Therefore, one has to see how SBI is handling it.
One needs to see the credit growth as well. So out of the three companies you mentioned, SBI will be under our radar.
We continue to remain positive on banking and financial services, but PSU banking is one space where we are still extremely cautious. We are watching the segment very carefully.
ET Now: Is there any stock that you would want to share, if at all?
The stock has not moved up. It is the most efficient power producer. Investors can very easily get into the counter and expect a 30-40 per cent return over a year.
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