PSU banks won’t be in a bubble even if they rally another 50% in 2024: Rajat Rajgarhia

economictimes.indiatimes.com:

Rajat Rajgarhia, Director, Motilal Oswal Financial Services, says why should public sector banks be constrained by a historical valuation band? Why cannot they trade at 1.5x, 2x if they can deliver 16%, 17% ROE for the next 3-4 years which means that we are still talking about these stocks that can potentially double from here after doubling last year. I do not think they are anywhere close to a bubble now. I do not think if they rally another 50% this calendar year, they would still be in the bubble, just that the stories are getting better as the growth orbit becomes better.”

But will it be more of the same this year as well? The same PSUs, defence, railways, renewables, power, EMS, manufacturing at large or do you think the profit pool is going to be created somewhere outside?
Rajat Rajgarhia: You just pre-empted that answer of profit pool. In this country, it is very important to identify profit pools, whether you want to be a shark in a pond or a fish in the ocean and we are going to see profit pool of many sectors moving from a pond to a semi-ocean and that is where identifying some of them early, even if they have looked for a sector, for a company to be 10x in the market cap, you will always be wondered by the first 2x or 3x.
But do not miss that next 3x because that happens from a size, that happens from an allocation, ?hat is why it is very important to understand how much time you spend in the market rather than thinking how do you try to time the market.

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