In the current market landscape, lenders—banks and non-banking financial companies (NBFCs)—offer the most attractive risk-reward opportunity, believes Mahesh Nandurkar, MD & Head of Research at Jefferies India.
Speaking to CNBC TV-18, he points out that banking stocks are trading at valuations one standard deviation below their long-term averages—making them the only sector in India with such a significant discount. Coupled with the Reserve Bank of India’s supportive stance on liquidity, the stage is set for a turnaround in credit growth.
Over the past year, the sector has struggled with sluggish deposit growth and rising loan-to-deposit ratios, forcing banks to curb lending. But with liquidity improving, these pressures appear to be easing, making financials the best bet at this juncture, Nandurkar argues. He said that concerns over a recent derivatives issue involving IndusInd Bank may trigger broader regulatory scrutiny, but he views this as an isolated event rather than a systemic risk. As deposit and credit growth pick up, worries around asset quality should also subside, further strengthening the case for financial stocks.
Also read: SIP stoppage ratio hits an all-time high of 122% in Feb
On the flip side, he remains cautious about the IT sector. While valuations have come off their peaks, they still sit 15-18 percent above historical averages. Investors were willing to pay a premium when the sector enjoyed strong tailwinds—a robust US growth outlook and a favorable dollar—but with these factors fading, paying a 25 percent premium no longer seems justified. Given the broader market’s correction, with over 100 stocks trading below their long-term averages, he sees little reason to chase IT stocks at current levels.
With global economic uncertainties persisting, he believes the outlook for technology stocks remains fragile, making financials the more compelling sector to own in today’s market.
Read more: Trump threatens 200% tariffs on EU liquor in retaliation to ‘nasty’ 50% tariff on US whiskey
In today’s session, domestic benchmark indices ended the truncated week on a negative note on March 13 as persisting global uncertainties outweighed the optimism emerging from soft inflation prints of India and the US. Automobile and information technology stocks were hit especially hard, weighing down on the Nifty and Sensex.
The benchmarks had opened the session in positive territory, buoyed by upbeat global cues after inflation in the US came in milder-than-expected, sparking hopes of providing the Federal Reserve with more room to cut rates.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.
Content retrieved from: https://www.tradingview.com/news/moneycontrol:39d3e9077094b:0-banks-offer-best-risk-reward-it-stocks-still-expensive-jefferies-mahesh-nandurkar/.
