Prefers large private sector banks; liquidity to be biggest driver over 12- to 18-months: Pranav Gundlapalle

economictimes.indiatimes.com:

Pranav Gundlapalle, Senior Research Analyst, Sanford C Bernstein, says they prefer banks over NBFCs, and among banks, private banks over public ones. This is because public sector banks are heading towards a situation where their loan growth will match their deposit growth. The market hasn't fully accounted for it yet. This is why he prefers large private banks over public sector banks.
Gundlapalle further says for the first six months, the main driving factor for the banking sector will be asset quality. So, while it does not get worse, the pain could last for a couple of more quarters. Over 12- to 18-months, liquidity will be the biggest driver for the various banks. If liquidity improves, the ones which are starved for liquidity, like Axis and HDFC will do a lot better. If it remains tight, the ones with more buffers will chug along. But for the overall sector to do well, liquidity improving will become the key.

Let us first start off with what is happening within private banks and what do you think the pecking order is looking like right now because there has been quite a bit of rotation of late.
Pranav Gundlapalle: The way we are seeing it is a reversal of the tightening moves that RBI used over the last 12 to 18 months.

Things are getting better and therefore, we are probably off the worst point in terms of growth. We should start seeing an improvement in growth. In terms of our pecking order, we still prefer the large private sector banks where HDFC, ICICI, and Axis are the top picks for us.