Will valuations mean revert, my expectation is, most probably it will not.
Will the stock generate returns for shareholders from here, probably yes.
I feel valuations will not mean revert because if we compare valuations of the top 4 private banks, HDFC and Kotak enjoyed high valuations as compared to ICICI and Axis. The reason for that is HDFC and Kotak were consistent in growth, profitability and NPAs, while ICICI and Axis had their own issues. Now, all 4 private banks are almost on par. Hence HDFC and Kotak will not enjoy the valuation premium going forward, so no mean reversion.
Having said that, if our economy continues to do well, all 4 banks will participate, and if they are able to grow their earnings, then the share price will follow the earnings growth.
Disc: Invested
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