Why Ajay Vora is neutral, not overweight on banks in near to medium term

economictimes.indiatimes.com:

Ajay Vora, Head-Equities, Nuvama Asset Management, says last quarter, we have seen a NIM compression across most banks and that has been a little more than what the market was expecting. Now the view is getting established that the rates are unlikely to come down in the near term. In fact, they will go a bit higher and put more pressure on the NIMs.

So although the credit growth is still very strong, there is unlikely to be any material earnings upgrade for most of the banks in the near to medium term.”The overall RBI monetary policy commentary was very balanced. There were hawkish as well as dovish tones to it. The Governor said that tomato and other prices are expected to come off sharply but the incremental CRR (ICRR) is having a bit of a negative impact on banking stocks. What is your reading of this?Broadly, the governor has built an amazing credibility post-Covid in terms of the way they have managed the economy and the system liquidity.

The current action on what they have done on the CRR, on the incremental NDTL, is also a good move because inflation pressures have been cropping up across the world and in India as well because of rising food prices. The additional liquidity in the system is something that the governor has decided to suck out and maybe they have been pretty flexible with their actions. What they have mentioned is that in the September meeting, they will take a call on if some revision needs to be done.

So I do not think it is a material change for the overall system. But definitely they will continue to do things which are good for the economy and the system liquidity.So it is not a material change coming in and for now, it is temporary. Let us see what that September 8 reconsideration brings in.