Outlook for the Indian banking sector seems upbeat due to a pick up in growth and a favourable corporate credit cycle, Mahesh Patil, chief investment officer at Aditya Birla Sun Life Asset Management Company, has said.
“The current growth is picking up … we are seeing that the corporate credit cycle is looking favourable… so, I think, overall, both the private banks as well as PSU banks should do well,” he told in an interview to CNBC-TV18.
Patil also stated that the overall credit growth of banks is stronger because their expenses and cost didn’t increase much, which has also led to margin improvement.
However, he expects the sector to witness a slowdown because of rising domestic inflation, which could also lead to a slowdown in consumption patterns.
“I think there could be some kind of slowdown because of our inflation, and that could lead to some slowdown in consumption … for a longer term, our preference still remains with the private sector banks,” Patil said.
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Talking about the Indian market, he said that he sees the current market scenario to be upbeat, but would remain cautious due to the ongoing global slowdown and the sharp increase in interest rates by major global central banks.
“In the current market, I think the India story looks fairly strong and good; we are not seeing any major impact in the domestic sectors … but because of the global slowdown and the sharp increase in interest rates, we have lowered exposure to some of the stocks that include metals, and to some extent, the IT sector,” he added.
Patil also mentioned that the outlook for the auto sector is improving as volumes have picked up in the four-wheeler segment on the back of an improving economy.
However, he still believes that some auto stocks have rallied because valuations continued to be on the higher side.
“Companies that have a better competitive position and pricing power in the market — that’s where we’ll be positive … that could essentially be more in the four-wheeler space, rather than the two-wheeler space,” he said.
Speaking on the IT sector front, Patil said that IT companies are looking fairly reasonable in terms of valuations post the recent market correction and even in terms of outlook on growth.
