TLDR:
- Investors are turning towards China due to stretched valuations in India’s financial sector.
- Macquarie recommends being long on public sector banks and selling private sector banks.
Investors are expressing concerns about India’s financial sector, with Macquarie highlighting a preference for Chinese markets due to their lower valuations compared to India’s stretched ones. The brokerage recommends a long position on public sector banks due to lower liquidity positions and loan-to-deposit ratios. It advises selling private sector banks, citing recent regulatory actions, dipping loan growth, and normalized credit costs affecting return on assets. While Macquarie sees value in HDFC Bank, it suggests waiting before going long on the stock, as there is still uncertainty regarding the bank’s performance. The brokerage notes that many hedge funds have covered short positions in HDFC Bank, but overall investor confidence remains shaky. With regards to One97 and PB Fintech, Macquarie suggests caution until regulatory uncertainties are settled. Shriram Finance is in a consensus overweight position, while profit-taking is expected at current levels for PB Fintech. In conclusion, Macquarie emphasizes growth challenges in the financial sector, signaling a preference for PSU banks over private sector banks in the current market environment.
