Private vs PSU Banks: What’s driving the market? Sudip Bandyopadhyay explains
Vodafone Idea. They now need to return to the drawing board to find ways to raise significant funds to handle these dues,” says Sudip Bandyopadhyay, Group Chairman, Inditrade Capital. Edited excerpts:
ET Now: Though there has been a furious run-up in the Nifty Bank Index, it is the PSU banking stocks that are not participating much. What is your sense of what is exciting for these private banks, and why are PSU banks still lagging? Do you believe that PSU banks will catch up next week?
Sudip Bandyopadhyay: There are two aspects to this entire BFSI (Banking, Financial Services, and Insurance) sector—buy or not buy, rally or not rally. The first aspect is that interest rates are going to come down; it’s just a matter of time. The US has already started cutting rates, and while we can debate whether it will happen in October or December, in India, interest rates should and will come down. When interest rates decrease, BFSI benefits because there is typically a 30-40 basis point advantage between the rate cut and the pass-on effect in BFSI, so they gain, and it should be a secular benefit. However, the efficient banks and NBFCs (Non-Banking Financial Companies) will benefit more, obviously.
The second part of the argument is that there is a significant, for lack of a better word, war for deposits. Demand is high, and a bank's success will depend on its ability to mobilize low-cost deposits. Here, the distinction becomes clear—it has to be an efficient bank with a large network to effectively mobilize deposits and
