Nikhil Rungta , Co-chief Investment Officer, LIC Mutual Fund , says from a medium to long-term perspective, without the financial sector, the index will not move much. As of now, in the BFSI segment, they are bullish on the non-banks and non-lenders – the NBFCs , insurance, and wealth managers. Rungta says LIC MF is bullish on pharma, IT, and FMCG, especially consumer discretionary stocks.
According to him, the juice has just started flowing in these spaces. On a YTD basis, Nifty Bank has been continuously underperforming the benchmark. What are you seeing in that? Are the valuations cheap now? Should one look to increase exposure in the banking space? Nikhil Rungta: We believe the banking sector has underperformed but in terms of earnings that contribute 40% to 50% of the index, they have underperformed for a reason.
Specifically, deposit garner issues have started in the banking industry. Next is the problem with mutual funds, the issues that are going on. RBI claims that their deposits are moving toward mutual funds, the SEBI is saying that their money is flowing into F&O.
We believe that going forward, with the falling rate cycle coming into picture, we will start seeing pressure on the margins from these banks. On the asset side, their yield will start trending down with the fall in the rates. However, on the borrowing side, since they are unable to garner deposits, the rates would not fall enough.
So, there will be pressure on the margin. But, on the other side, valua.