Indian Equity Markets
are on a dream run and just climbing the hill, discovering new heights from one
session to another one. The investors both domestic and international seem to
have lot of faith in the Indian Equity Markets and are buying the Indian Growth
Story. We have as a nation also gone through some historic changes-Demonetization
and GST being the pioneer of those changes.
The current
government have been focusing their policies on pro poor and middle class,
aspiring youth, re energizing the sick units, infrastructure development,
housing for all, power for all, healthcare affordability, focus on skill
development and many other positives.
In all this noise ,
they are swiftly working on merging of PSU banks and NPA reduction of Indian
Banking System with some good regulations. The banks have a big NPA of the UPA
2 regime due to many projects not taking off, Coal Scam and many infrastructure
projects been stuck due to bureaucratic issues. This government have actively
been working on resolving the said issues and we can see improvement in Asset
Quality of the leading banks.
The private banks in
India have always been conservative and strict in their credit policy and
result of which they have a very healthy balance sheet. They have quality
assets and they have seen realizations coming in from stressed sectors. The
private banks are the most to benefit from the steps taken by government. With the
growth coming back in economy and business growing, we can see huge growth in
banking transactions. The demonetization and digitization push will be
benefiting the private banks as they have already invested in the technology
and have the infrastructure required. Also they are aggressive in the same,
Kotak Bank's 811 is an ideal example of the same.
The private banks have given an
average of 80% of returns since last 3 years.
Bank Nifty
|
1 Year
|
3 years
|
Return
|
26.90%
|
65.20%
|
Bank Name
|
Market Cap (in Cr.)
|
No of Branches
|
Employee
|
NPA
|
Return in 1 year
|
3 years
|
YES Bank
|
71605.92
|
1000
|
20215
|
1%
|
33.87%
|
194.15%
|
Indusind Bank
|
94211.53
|
1200
|
25314
|
1%
|
41.12%
|
191.79%
|
DCB Bank
|
6216.95
|
262
|
4979
|
1%
|
92.17%
|
152.69%
|
Kotak Bank
|
185972
|
1369
|
44000
|
1%
|
25.18%
|
124.24%
|
HDFC Bank
|
431161.22
|
4520
|
87555
|
1%
|
40%
|
103%
|
Axis Bank
|
122986.5
|
3304
|
56617
|
2%
|
-8.38%
|
35.20%
|
ICICI Bank
|
191080
|
4850
|
81129
|
5%
|
22.22%
|
17.61%
|
AU Bank
|
16991.1
|
300
|
NA
|
NA
|
90%
|
NA
|
RBL Bank
|
20384.56
|
239
|
4902
|
1%
|
80.84%
|
NA
|
What can be learnt
that the smaller banks have been able to outperform the big private bank, HDFC
is the only big private bank to give 100% plus returns in 3 years. The smaller
banks have added branches at double the pace of large private banks. Their
asset quality is also good as they do not get into big ticket loans. Indusind
Bank, Yes Bank, Kotak Bank and ICICI Bank are expected to outperform their
competitors in the coming years. DCB, RBL and AU Finance can be the next multi
baggers in coming decade.
India has the largest
young population in the world, if we understand they will be the highest
working, earning and spending population. This age group is educated and will have
access to all the banking services and will also use most of all the services
offered. This will take banking to next level and will have more digital
transactions, less physical presence- which will hugely impact the profitability
and reduction in cost.
The investors have
been turning away from FMCG, Pharma and IT due to muted or slow growth of sub
10%, the FII and DII are investing huge in the private banks as there is the potential
to grow 20-25% YoY. The private banks are yet to move aggressively in Tier II
and Tier III towns, these are majorly having huge PSU Bank presence.
I personally strongly believe that
these banks can give best returns in the coming decade.
