ETMarket Fund Manager Talk-More upside left in PSU banks as best in that class still reasonably valued: Spark Asia Investment

economictimes.indiatimes.com:

MUMBAI — The Indian banking sector exited its worst-ever downcycle after Covid, which led to a major clean-up in the balance sheet across the board. But it’s public sector banks that have seen an almost 360 degree shift in earnings performance, and this reflects in the stock prices, as many of them turned multibaggers since the pandemic. Despite the rally, many of the PSU banks are still reasonably valued, believes P Krishnan, CIO and Managing Director, Spark Asia Impact Managers.

“On PSU banks, the best in that class are still reasonably valued. They have upside left when we look at our framework of valuations viewed against growth/RoE/RoA outlook,” Krishnan said in an interview with ETMarkets. Edited excerpts:After the stellar rally in benchmark indices in the last 5 months, how comfortable are you with the valuations?Firstly, the valuations have expanded by a lesser margin than the 16% rally, as nearly half of the year has elapsed and valuations should always be referenced with time.

There is earnings growth with time. Two, the market had yielded negative returns in the 15 months prior to this rally, bringing valuations below the 2021 levels. Three, there is a deep valuation divide in the market.

There are pockets of comfort and there are segments which are heavy.Your flexicap fund has given over 26% returns in 1 year. Could you share the performance of your multicap portfolio since inception and what is the stock-selection approach? We are sector agnostic, market cap agnostic, if there is adequate liquidity, and are open towards investing in private and PSU stocks. We have no bias towards or against cyclicals or secular growth sectors.