Can Kotak Bank or HDFC Bank be expected to outperform this year?

“We have seen that the deposit rates have lagged the lending rates and to that extent, the NIMs have expanded but something reverse has started to come in which is what has affected the larger banks like the HDFC Bank because they are not able to garner enough of the deposits. Something similar will happen to some of the PSU banks as well but not necessarily a Kotak Bank or some of the other banks,” says independent market expert Mahantesh Sabarad.

In the financial space, private banks vis-a-vis public sector banks and within private, Kotak Mahindra Bank as well as HDFC Bank have been rank underperformers last year. Do you expect them to put up some sort of outperformance this year if at all?
The mood is dependent on what kind of deposit growths they will garner going forward. There is also this overhang on HDFC in terms of its merger with the bank and that is taking quite some time now. As far as Kotak Bank is concerned, it should be able to do better going forward because in the interest rate cycle, when we reach the peak of the rate hikes, most of the banks will start to tend to do better.

We have seen that the deposit rates have lagged the lending rates and to that extent, the NIMs have expanded but something reverse has started to come in which is what has affected the larger banks like the HDFC Bank because they are not able to garner enough of the deposits.

Something similar will happen to some of the PSU banks as well but not necessarily a Kotak Bank or some of the other banks. It has to be bank specific to talk about going forward whose margins will expand. Like I mentioned before, none of these banks will now have any NPA worries to really talk about going forward because the loan growth has been substantially large with little or no great slippages.

There are slippages, but it is not overwhelmingly large, like we used to see in the earlier cycle. Coming back specifically to your question, it has to be very bank specific. Potentially, we have to see the merger of HDFC and HDFC Bank being consummated and then we have to see how Kotak would like to take its deposit growth forward.

In general, if there is a little bit of tinkering change in the taxation structure, short-term definition, long-term definition, time duration, could that be a sell off moment for the market?
No, tax changes being expected are on the personal income tax side, which would mean that there could be a consumption boost that will come in through the taxation route if that happens. I am not looking at a selloff. In fact, the Budget should be a trigger in terms of the markets going up.

As far as the capital gain taxes are concerned, there has also been a concern about how the government has introduced long-term capital gains on equity markets and that is quite punishing. Any move there will bring it down or levelise it in terms of the taxation or even granting of certain exemptions related to that which could take the markets higher. So, if at all, the trigger for the Budgets to provide for is on the upside, not on the downside.