Stock Analysis, IPO, Mutual Funds, Bonds & More

Avoid NBFCs, stick to these 3 banks: Yogesh Mehta, MOFSL

One can consider farm and consumption sectors from short-term perspective, says Mehta.

ET Now|
Updated: Jun 07, 2019, 10.08 AM IST
Yogesh Mehta-MOFSL-1200
Focus will now turn to budget which will be in the first week of July. A pro-farmer or pro-poor budget is expected, said Yogesh Mehta, Vice-President, Motilal Oswal Financial Services, in an interview with ETNOW.

Edited excerpts:

How are you viewing things as we head into trade today post the RBI credit policy that came out yesterday?
Generally a 25 bps rate cut was expected from the RBI policy. The only disappointment which has come is that the CRR cut has not taken place. The liquidity issue is still there with the NBFCs and the transmission of the rate cut is not happening. That is the biggest concern. So probably monsoon will be awaited and then RBI may take a next call for a further cut there.

We believe that post this event, focus will turn to budget which will be in the first week of July. A pro-farmer or pro-poor budget is expected and there could be some agenda which has not yet been explored by the government in the first term. That may be taken in the second term. So, we are looking at the agricultural sector even in the consumption sector in that perspective so those are certain pockets where one can look at for at least short term perspective.

Yesterday the market was unnecessarily beaten down because of the Dewan Housing issue. What would you like to pick and pluck in this market?
We will totally avoid NBFCs at this point in time. Of course, housing finance as well as the private financials would be an opportunity. Both ICICI Bank and Axis Bank have not corrected much but we will choose these two and the RBL Bank within the financials. NBFCs we are avoiding because there is too much ambiguity there and from liquidity issue it is to now solvency issue.

Yesterday, we also saw a sharp crack in some of those banking names. The Nifty Bank fell the most in over six months yesterday. Would you take this as an opportunity to get into some of the stocks? Would it be frontline names or even from the broader markets?
Yesterday’s fall would provide a good opportunity in a few of the pockets. It would be a good opportunity to get into ICICI Bank and Axis Bank as also RBL Bank.

The other one would be Federal Bank.The Q4 numbers on YoY basis is where we have seen a strong traction and the provisions are much much higher and that has led to a better coverage ratio. Federal Bank is also one of the names where one can look at accumulating from current levels. Last time when I was on the show, I recommended DCB Bank. Post the Q4 numbers, it was Rs 204-205. Now, it is Rs 240 odd, at an all-time high. Similarly, on that line, we believe that on a correction mode, ICICI Bank at Rs 410-411, can be accumulated gradually.

RBL Bank should be considered by longer term investors with one, two, three years perspective so these are the few names one can look at accumulation in this kind of fall.

At a time when banks and mid tier banks are struggling with CASA, what sense does it make to buy a midtier bank?
Among mid-tier banks, DCB Bank had plans of increasing branches which did not happen over the last four-five quarters. Then in the last quarter, they did it and made provision for that. Asset quality has also improved substantially.

So after five-six quarters, a gap management has taken the stance of growth path on their aspects of the plan. We believe that it would be a good opportunity again and the price to book is right now at around even after Rs 235-240 level it will be not more than 1.5-1.6 times forward.

We think that a mid-tier bank has a lot of scope to expand further from here. I do not see HDFC Bank and Kotak Bank as good opportunity for investment but they have already grown to 3.5-4 times price to book, wherein these all are available with the trajectory path. Now 1.7-1.6 times price to book will have a better yield on your investments.

Also Read

In market carnage, look to buy in IT and select pharma pockets: Yogesh Mehta

Looking for opportunities in metals and PSU banks: Yogesh Mehta

Yogesh Mehta on YES Bank fundraise, Reliance deal & more

Yogesh Mehta on what to do with Reliance, SBI and ICICI Bank

Valuation-wise auto stocks look compelling: Yogesh Mehta

Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service