Banks & Financial Services Sector Update: Macro has done us in - attractively positioned for longer term investor - BRICS Research

Selloff on deteriorating macro environment. While the initial selling in bank stocks was largely due to expectations of rising delinquencies and slowing loan growth, the sharp fall seen in the last couple of weeks is a result of deepening worries about misplaced macroeconomic policy making — in short, a "crisis of confidence". While substantial action on stalled policy initiatives could act as a catalyst, it seems unlikely given election year compulsions.

Bank valuations are attractive. These have corrected significantly and they trade below their 5-year average P/E discounts vs. the broader market (Nifty). While we cannot predict the bottom, we believe that based on sector fundamentals, the selloff is overdone and the potential upside far outweighs downside risks for longer-term investors with at least a one-year investment horizon.

Source : Equity Bulls

Keywords