Banks to remain a compounding story in this market: Vikas Khemani

economictimes.indiatimes.com:

"Growth is coming in a reasonably good proportion. Investment cycle has just picked up. So, you have both triggers of investment cycle as well as the retail credit growing, which is a very robust," says Vikas Khemani, Carnelian Capital.What about the view when it comes to banks? Do you think that it will continue to remain a compounding story in this market?Absolutely.

I think, if you see Indian economy is going to go from 3 to 5 trillion dollars, banking is one of the largest sector which will lead it. A good part is that in banking our balance sheets are one of the best ever. Growth is coming in a reasonably good proportion.

Investment cycle has just picked up. So, you have both triggers of investment cycle as well as the retail credit growing, which is a very robust. So, you have diversified growth coming on the asset side and your balance sheets are very well in place.

And given what we have the credit infrastructure in place in the form of IBC and CIBIL score, I feel that there is a structural repair which has happened to the sector. I mean, we had written a note on this about a year ago. So, with the structural repair, I think the worry of NPA cycle, in that proportion what we saw last cycle would not be there.

So, to that extent, I feel that this sector can deliver anywhere between 15% to 20% return compounding over next five, six years as long as the economic growth continues. Within that, there will be ups and downs in cycles I am not saying that. But structurally speaking this sector is very well in good shape and can deliver good compounding ahead.What is the outlook then on the entire space and how you are looking at companies such as an IndoStar Capital and a Salzer Electronics as well, if you could just