Banking stocks are entering a "golden phase". There is a lot of money to be made: Sridhar Sivaram

The next 3 years will be a golden phase for banking stocks. All the stars are getting aligned. There is a lot of money to be made from these stocks. Buy ASAP: Sridhar Sivaram of ENAM

Banking stocks are entering a "golden phase":

Sridhar Sivaram of ENAM Holdings has come out with all guns blazing in favour of the largecap PSU and Private Banks. He opined that they are entering a "golden phase" and that there is a lot of money to be made from them.

"We are very bullish on the entire largecap private sector space. Our view is that we are entering this dream phase in financials for multiple reasons, all the stars are getting aligned," he said.

He explained that credit costs are getting normalised much faster than anticipated not only for the PSUs, but even for the private sector banks. Credit normalisation is happening very fast. Loan growth is coming back and as interest rates go up initially, most banks have a higher margin because the liability gets re-priced with a lag and assets get re-priced immediately.



He also opined that the threat from NBFCs has significantly reduced because most NBFCs are struggling and are facing challenges. The competition for the banks has reduced significantly.

This will result in better profitability plus growth coming back for the Banks, he added.

"We think that the next three years may be a golden phase for banks in general. Within the financial basket, I will just buy the top four, five banks. One can argue whether one is better than the other. I think all of them will do well. You pick your stock and just stay put for three years I think there is a lot of money to be made in the banks," he emphasized.

Don't take risk with small banks:

Sridhar Sivaram advised investors to stay with large cap stocks which includes a few PSU banks and the four, five largecap banks and to avoid small cap banks and also the cheap PSU banks.

"The runway is looking so good. Do I need to take that extra risk?,” he stated.

He explained that large banks have better ability to garner more deposits because of the branch networks.. Their costs are low and they have better ability to price loans and not get into riskier bets.

Bank ETFs are the best bet

Taking a cue from Sridhar Sivaram's advice, we can buy Bank ETFs such as Kotak Banking ETF, SBI ETF Banking, Reliance ETF Bank BeES etc. A list of all ETFs is available at the NSE website.