Next four quarters can be good for credit growth and good profitability for PSU banks: Neeraj Dewan

“Some good names are still available at one time book or a little less than one time one year forward. In the PSU bank basket, one can still be selectively invested and even invest on dips. The next two, three, four quarters can be good for credit growth and that can translate into good profitability for the PSU banks,” says Neeraj Dewan, Director, Quantum Securities

Looking at the kind of performance that we have seen over the last one year and it is safe to say that those PSU banks have been in a very bright spot. Do you believe they merit a definite buy or does one still remain cautious?
The kind of credit growth that we have seen in the last quarter and the kind of cleanup which has already happened in PSU banks can be stock specific there. You need to make sure about investing in a bank which is still valuation-wise attractive and do not go for some of the smaller banks which ran up too fast and are available at 1.5-1.7 book.

Some good names are still available at one time book or a little less than one time one year forward. In the PSU bank basket, one can still be selectively invested and even invest on dips. The next two, three, four quarters can be good for credit growth and that can translate into good profitability for the PSU banks.

What is your take on the entire power sector? Have these stocks become a good defensive bet?
PSU power names like NTPC, Power Grid are more or less defensive names because they have decent dividend yields but one does not get the upside as far as the stock is concerned. They have always performed less than what the market has performed. If one is happy with a single digit return and some dividend return, then PSU power stocks still are okay to invest in though definitely they are defensive, so that they do not even fall in the market fall.

In the power financial space, there is REC, PFC and they deserve a look because a lot of capex is happening in this category and there also the books have been cleaned. They are in a much better position to lend. REC, PFC can be looked at if we are playing the power story. Among the private names, Tata Power again saw a good rally earlier in the last one, one and a half years and now it is consolidating. Some more consolidation may happen but definitely Tata Power looks good for a long-term investment even now for the next one, one and a half years, if someone wants to invest in.

Like you mentioned, JSW Energy is getting a lot into green energy and electric energy. I think there is scope because they are investing a lot of money there. In the private sector, one can look at investing into power space but in the public sector, like I mentioned, if you have a longer-term perspective and if you are happy with a single digit return and some dividend return, then REC, PFC should be looked at.

What is your outlook on the entire real estate space? A lot of listed players appear to be prepared with new deep launch pipelines? How should one play some of the listed plays within realty?
We saw a good rally in the real estate space earlier but in the last quarter or so, the stocks are consolidating. There also one needs to be very stock specific because the NCR region, Gurgaon region where the property prices really moved up a lot from end of 2020 to middle of 2022, are seeing some softness or some consolidation in real estate prices.

It is because the prices had moved up too fast and they have become quite expensive. Second, interest rates also moved up a bit in the last two, three months. These two factors are resulting in consolidation as far as the prices are concerned. A lot of new launches are planned but if one is a long-term investor, definitely because interest rates maybe close to peaking out with the kind of inflation number we have seen.

So for a long-term investor, maybe these are opportunities one can invest in but in the shorter term, there can be some momentum because prices corrected last week and they can again come back to the mean. But I do not see a meaningful upside as yet. So maybe some more consolidation is needed before the stocks start moving up.

What about Titan and other retail names?
This quarter should be good for all these retailers, even Titan because gold prices have gone up and this quarter will have the festival season also. So, quarter numbers should be pretty good because the numbers around Diwali were quite good as far as retailers are concerned. The footfalls have also gone up. Titan should come up with a decent set of numbers and there can be some momentum on the upside for Titan.

But it is more like a momentum play because it is an expensive stock even after consolidating at these levels. Other retailers should be good because a fashion retailer like Arvind Fashion or Aditya Birla will see good numbers coming up in Q1. Over the last couple of years, most of them have got their costs down and the working capital cycle has improved for them. So with the top line improving, this quarter should be good for them.