Tabassum Inamdar’s prophecy is that neglected PSUs are poised for rally on emerging macro/political clarity. She has stated that while Goldman Sachs has favored private banks over public sector (PSU) banks for the past three years on concerns about stressed assets and low capital adequacy ratios (CAR) for PSUs, the macro recovery and potential for post-election reforms should see a gradual reduction in stressed loans on lower slippages and higher recoveries. PSUs, in particular, may see NPLs fall by 3% in FY16, after increasing 17.5% in FY15E.
She has stated that Indian banks, especially high-beta PSU banks, could be at the cusp of re-rating given improving macro and likely political clarity post the upcoming elections. A sharp correction in current account, falling inflation, reforms in power and road space, as well as deleveraging efforts by corporate India could lead to reduction in stressed assets, revival of investment activity, and improvement in the earnings trajectory for banks, she adds.