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Indian banks
Feedback from global road show –
What are investors thinking?
Event
We met around 100 investors across Asia, US and Europe over the past
month. We present our road show feedback takeaways below.
Impact
Investors currently Underweight but now looking to add financials:
Though substantial sections of investors across the globe are Underweight
Indian financials, they have now started to look at Indian financials positively.
A slowdown in loan growth coupled with compression in NIMs is already
factored into the price and analyst estimates and valuations have also
become a bit more attractive, according to investors.
Waiting for a better entry point into the sector: The recent rally in Indian
financials has made investors slightly jittery about taking exposure at these
levels. There were queries whether there could be a better entry point into this
sector. We believe there could be one around July. 1Q12 results (to be
declared in July) are likely to be one of the worst for Indian banks due to weak
volume growth and NIM compression. On the macro-economic front, oil price
continues to remain high and inflation could negatively surprise with an
impending fuel price hike post state elections.
Savings rate deregulation – the biggest concern on investors’ radar:
Investors were worried about savings rate de-regulation which the market is
yet to price in. Though most of them believe that it is some time away, their
fear is that markets may not wait for the actual implementation of savings rate
deregulation to happen. Markets will start pricing in the moment RBI releases
its draft paper on savings rate deregulation.
Investors looking to play the liquidity trade by taking exposure to
wholesale funded institutions: With liquidity expected to improve further
and consequent drop in short-term rates, investors were looking to play
wholesale funded institutions like YES Bank, infrastructure NBFCs like IDFC,
PFC, REC, etc. Many hedge funds were looking to short the PSU banking
basket and go long on stocks like YES Bank, ICICI Bank, etc.
Lot of interest in ICICI Bank, mid-cap names: Investors were largely
positive on ICICI Bank though there were some differences on appropriate
valuation for the company. There is lot of interest in Shriram Transport,
IndusInd Bank and YES Bank. Investors continue to be Underweight SBI.
Outlook
Long term positive, short term there could be a trade: We remain positive
on the sector over a 12-18month span as most of the concerns on slowing
loan growth and NIM compression are priced in and asset quality could
positive surprise towards 2HFY12E. A short-term trade for the sector could be
going long on stocks like HDFC Bank or ICICI Bank and shorting the Bank
Nifty (excluding the 2 mentioned stocks) or a basket of PSU banks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian banks
Feedback from global road show –
What are investors thinking?
Event
We met around 100 investors across Asia, US and Europe over the past
month. We present our road show feedback takeaways below.
Impact
Investors currently Underweight but now looking to add financials:
Though substantial sections of investors across the globe are Underweight
Indian financials, they have now started to look at Indian financials positively.
A slowdown in loan growth coupled with compression in NIMs is already
factored into the price and analyst estimates and valuations have also
become a bit more attractive, according to investors.
Waiting for a better entry point into the sector: The recent rally in Indian
financials has made investors slightly jittery about taking exposure at these
levels. There were queries whether there could be a better entry point into this
sector. We believe there could be one around July. 1Q12 results (to be
declared in July) are likely to be one of the worst for Indian banks due to weak
volume growth and NIM compression. On the macro-economic front, oil price
continues to remain high and inflation could negatively surprise with an
impending fuel price hike post state elections.
Savings rate deregulation – the biggest concern on investors’ radar:
Investors were worried about savings rate de-regulation which the market is
yet to price in. Though most of them believe that it is some time away, their
fear is that markets may not wait for the actual implementation of savings rate
deregulation to happen. Markets will start pricing in the moment RBI releases
its draft paper on savings rate deregulation.
Investors looking to play the liquidity trade by taking exposure to
wholesale funded institutions: With liquidity expected to improve further
and consequent drop in short-term rates, investors were looking to play
wholesale funded institutions like YES Bank, infrastructure NBFCs like IDFC,
PFC, REC, etc. Many hedge funds were looking to short the PSU banking
basket and go long on stocks like YES Bank, ICICI Bank, etc.
Lot of interest in ICICI Bank, mid-cap names: Investors were largely
positive on ICICI Bank though there were some differences on appropriate
valuation for the company. There is lot of interest in Shriram Transport,
IndusInd Bank and YES Bank. Investors continue to be Underweight SBI.
Outlook
Long term positive, short term there could be a trade: We remain positive
on the sector over a 12-18month span as most of the concerns on slowing
loan growth and NIM compression are priced in and asset quality could
positive surprise towards 2HFY12E. A short-term trade for the sector could be
going long on stocks like HDFC Bank or ICICI Bank and shorting the Bank
Nifty (excluding the 2 mentioned stocks) or a basket of PSU banks.
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