Current state in PSU Bank: Its in a messy affair … However ……. we believe ….. Asset quality improvement is on the horizon RoEs of PSU banks to improve Valuation: Set to re-rate Time is ripe to Buy PSU banks.
– A multi-tiered, capital-efficient structure will evolve with a few larger banks leading the pack and mid-sized banks focusing on different niches. The government will aid larger banks to build scale
-Time is ripe to look at large PSU banks as structural long-term plays–they will breach the historical trading range and narrow the gap with private players. Increase weight on SBI and BoB
– At the same time, be cautious on smaller PSU banks for which consolidation is likely take longer till they find their niche