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Is the Banking Sector at Bottom of the Cycle?
May 18, 2018


I love talking about the super investors of India.

And one of the biggest super investors - Prashant Jain of HDFC Mutual Fund is betting big on the revival of the banking sector.

Specifically, he is betting big on public sector banks. He believes, this is the bottom of the cycle and we will soon see a solution to their balance sheet problems.

Well, we at smart money secrets were never really interested in public sector banks.

While we also believe the banking sector may see a turn around with the recent clean up, we don't believe the PSUs are the right vehicle to ride that turnaround.

After the recent Reserve Bank of India new guidelines, both public and private sector banks have seen a significant rise in non-performing assets. That has resulted in a sharp decline in net profits.

In fact, most of the public-sector banks have reported losses in the last quarter of FY18. The RBI has even barred Dena Bank from further lending.

The RBI is considering barring more lenders that have failed to maintain minimum capital as per RBI's guidelines.

We believe, this is definitely a sign of a further consolidation in the banking sector. If one can pick a bank with a differentiated lending strategy and a strong management, it could be a good investment going ahead.

Data Source: BSE India

This Chart Of The Day was published in The 5 Minute WrapUp - Warning: Following the Demigods of Dalal Street Can Be Dangerous to Your Wealth

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