‘Con­tra Call Now would be SBI and ICICI Bank’

The Economic Times - - Money -

In a con­ver­sa­tion with ET Now, San­jay Dutt, Di­rec­tor, Quan­tum Se­cu­ri­ties, says loan de­mand will pick up from June quar­ter on­wards. He says he is bullish on the mar­kets be­cause in­tel­li­gent buy­ers on the Street are look­ing for good in­vest­ment ideas. Edited ex­cerpts: I am more bullish now be­cause of the fact that peo­ple have now started look­ing for ideas. What­ever I hear from the smart money right now, the in­tel­li­gent buy­ers on the Dalal Street are look­ing for good in­vest­ment ideas. They had all held back think­ing that the de­mon­eti­sa­tion im­pact would con­tinue for a longer pe­riod and that the Trump vic­tory was a prob­lem. There is a phe­nom­e­nal op­por­tu­nity in the mar­ket and one needs to look at that. In fact, most of the head­winds are now more or less out of the way.

The big­gest story which I told you last time is that while we quib­ble about 25-50 bps of pol­icy rate cut, on ground there ac­tu­ally has been a 200 bps rate cut for con­sumers and in­dus­try from Septem­ber-Oc­to­ber days to now. Global at­ten­tion is turn­ing to In­dia be­cause the equa­tions that Trump has with a lot of coun­tries are mak­ing us a safe ally to do busi­ness with. All th­ese fac­tors are re­ally fall­ing in place and the good run has just be­gun.

WHAT TO BUY

You have been fa­mous for con­tra calls. What is that con­tra sec­tor that you are bet­ting on this year? I have never re­ally given a call on pri­vate banks like ICICI Bank, but the con­tra call here would be now State Bank of In­dia and ICICI Bank be­cause the op­por­tu­nity that th­ese two banks are sit­ting on is huge. If you see the im­pact of de­mon­eti­sa­tion, the big­gest ben­e­fi­cia­ries are th­ese two banks. The largest banks would be able to re­tain a sub­stan­tial amount of de­posits in CASA or in some other form. Their mar­gins would im­prove and if the in­vest­ment de­mand picks up, capex de­mand picks up, the econ­omy picks up, and you will see their bot­tom lines ex­pand. Among large­caps, th­ese two banks look very ex­cit­ing.

But where is the credit growth? Do not look at the rear-view mir­ror. It is ex­actly like what we did when de­mon­eti­sa­tion was an­nounced when ev­ery­one said ev­ery­thing is col­laps­ing and this quar­ter would be dead and we do not know when de­mand would re­vive, when the con­sumer will come back to buy, etc.

Mar­kets start to dis­count things well in ad­vance. I have no sec­ond thoughts that credit de­mand will pick up and you are al­ready see­ing that scene change. Peo­ple are miss­ing it. Banks are con­sciously shift­ing to con­sumer-led de­mand more than in­dus­try-fed de­mand. That means banks are try­ing to fo­cus on in­di­vid­ual bal­ance sheets of con­sumers by want­ing to give out a large amount of hous­ing loans, loans against prop­erty, loans for pri­vate con­sump­tion, loans for buy­ing durables, non-durables, ev­ery­thing else, per­sonal loans be­cause they see that in a time like this when in­dus­try de­mand is not pick­ing up, we are still man­ag­ing to dis­burse a huge amount.

I see a large num­ber of banks do­ing that in­clud­ing ICICI Bank, and in the next two to three months, you will see in­dus­try de­mand pick­ing up. The prob­lem we have with the in­dus­try right now is that some of the top 10 or 15 bor­row­ers in the coun­try have a ma­jor is­sue in terms of their bal­ance sheets be­ing lever­aged and skewed to­wards ex­tra debt and not man­ag­ing to ser­vice it.

To­day banks ac­tu­ally are scared of lend­ing. We have seen a re­cent ex­am­ple of the chair­man of a bank be­ing ar­rested. I am not pass­ing a ver­dict whether it was right or wrong, but there is gen­uinely a lit­tle bit of fear among large lenders to take ex­po­sure or re­struc­ture some of the debt. I see that go­ing away be­cause the gov­ern­ment is mov­ing in that di­rec­tion as to­tally in charge of this prob­lem. I am not wor­ried that cor­po­rate de­mand or the in­dus­trial de­mand for loans will not pick up. It will pick up from June quar­ter on­wards and even if it does not pick up, the risk-re­ward ra­tio is still okay. You would not end up los­ing much if you bought banks on any de­cline.

We have seen mul­ti­ple block deals hap­pen­ing in the NBFC space. What pocket within the NBFC space are you bullish on? Some of th­ese mi­cro­fi­nance lenders look a lit­tle ex­pen­sive right now. On a cor­rec­tion, I would want to buy them. Some­thing like an Ujji­van looks good. Mort­gage fi­nancers, such as In­di­a­b­ulls, Cap­i­tal First, PNB Hous­ing, Repco Fi­nance, are some of the in­ter­est­ing com­pa­nies that can be looked at for long term. But ob­vi­ously you need to un­der­stand that when there is froth.

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