Would NBFCs do better than banks in a falling rate regime? Vinay Sharma answers

economictimes.indiatimes.com:

Vinay Sharma, Equity Fund Manager, Nippon India MF, says that “when the economy reaches a certain size, the sophistication of products increases and a similar experience should happen in India and people would buy different sorts of financial products, payment mechanisms and wealth management products. Purely from a growth perspective, we would be more excited on the NBFC side if one is taking a long-term view.”You have been very bullish on the banking sector. Is this as good as it gets now? From a stock market standpoint, is consensus pricing getting built in?If we were to put it, we would say that we are somewhere in the middle of a good cycle.

There are some more legs for the cycle to go as growth seems to be reasonably strong for the next few quarters at least. If the capex cycle, housing cycle, general economic, macroeconomic scenario remains the way it has been it can go on longer as well and to that extent both growth and credit quality does not see any immediate risk from our perspective.

Profitability might be a little bit volatile here and there because of some fluctuations in margins. Some of the pre-quarter releases have seen a little bit of dip in CASA growth and that might have an impact on margin but overall from a banking sector perspective, the most important criteria has always been growth and credit quality and on both of these factors, we are fairly sanguine.Which are the NBFCs that would benefit from a declining interest rate environment? Banks so far have benefited from a rising interest environment. Now things are becoming benign and NBFCs would start benefiting. Is it time to look the other way now?There was a lot of mispricing and there were segments which were very cheap.