The banks are still being laggards. Is it a matter of time before they catch up and therefore there is an opportunity there?
One of the good things that has happened over the last couple of years is that both PSU banks and the private banks have restructured their NPA books. They have increased their provisioning. Also the cycle has turned for some of the big bang sectors like steel, real estate and suddenly what were considered to be risky sectors are considered safe sectors from a lending perspective now,
Companies like Jindal Steel and Power or Hindalco had and still have high levels of debt. Tata Steel repaid $2 billion; all this translates into a better book for banks. We saw the DHFL acquisition by Piramal for over Rs 37,000 crore. So, again DHFL is not going to be an NPA.
We need to wait and watch for credit growth which is actually inflation adjusted and close to zero. That is not the way banks in emerging markets should work. The credit growth has to be very high double digit, far higher than GDP growth. So it is just a matter of time. The valuations are very attractive and therefore it is time to start looking at them but they are probably some time away before they can really do well.
