Tuesday, 18 November 2008

PSU banking a safe bet: P Seth

Prashasta Seth, Senior Fund Manager, IIFL Wealth, India Infoline feels that PSU banks are one of the safest bets in the market at this point of time.

Seth told CNBC-TV18, "In terms of private sector banks, I think the concerns are on two fold; one on the valuation side, HDFC Bank is still trading at a high teens with respect to next year earnings. Similarly, Axis and Kotak are also trading in double-digits in terms of P/E while if you compare the PSU banks they are trading in single-digit. So a bit of valuation concern was there in the private sector banks. Secondly, a lot of concerns have emerged in the last one month over the NPA (non-performing assets) levels that we might see at the private sector banks. Since there is no clarity on what the numbers will finally come out to be, people are moving out to stocks where there is a lot more clarity on the earnings front."

He further added, "Now the final numbers that we might see in FY10 might be slightly better than what market is anticipating now with respect to private sector banks but given that, we do not have any visibility of the earnings. People are taking the slide to safety. With respect to PSU banks joining, it is more of a market affected fact that they have been the strongest sector in the market. I think they are just joining the market fall. We still believe that PSU banks are one of the safest bets in the market at this point of time. I think there is a lot of valuation comfort with price to book on an average less than one and price to earnings in single-digits. So we still believe that PSU banks are one of the spaces to hold in the market though private sector banks might see slight more weakness on valuation concerns."

Source: Moneycontrol

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