Indian banking sector robust, investors should stay invested: Emkay#39;s Krishna Karwa

Market Outlook

The Indian banking sector has performed relatively well in recent times and is a preferred sector for investors, said Krishna Kumar Karwa, managing director at Emkay Global.

“The banking sector continues to do well and investors should stay invested,” he said in an interview to CNBC TV18.

Karwa believes that investors in the banking sector are expected to receive  at least 15 to 20 percent compounded returns within the next two years. He added that while large private banks have delivered almost 15 percent returns, public sector banks have delivered higher returns of almost 30 to 40 percent.

The MD recommended investors continue investing in public sector banks for stellar returns.

“Banking continues to remain robust and from a next two-year perspective, investors should at least get 15 to 20 percent compounded returns.” he said. “So, aggressive investors should look to invest in public sector banks, or even Tier 2 or Tier 3 private banks, where the returns might be even more stellar.”

Apart from the financial services sector, Karwa believes digital manufacturing also seems to be performing well with the capex cycle picking up and recommended investors to further invest in the sector.

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Talking about public sector banks, Karwa said that the quality of their balance sheet is very robust and the ability to raise deposits will be a key differentiator of growth.

“Public sector banks have a very strong franchise and they should be able to take a lead over some of the medium-term, mid-level private banks as far as raising deposit,” he explained.

On November 9, the PSU bank index was up three percent at 1:30 pm.

Commenting on Indian markets, Karwa said that the upbeat performance is a result of robust corporate performance and government policy.

“We are almost at a 52-week high. And this is obviously a function of robust corporate performance and robust government policy which augurs well for the coming three to five years,” he said.