Prefer ICICI to HDFC Bank for next 6-9 mths: Devang Mehta

OMCs can be a good buy for next 6-9 months while it is better to avoid PSU banks in the same period, Devang Mehta, Head - Equity Advisory, Centrum India, tells ET Now. 65881853 65881120 65896054 Edited excerpts: Is it time to think contra on OMCs? Is this the time to be a brave buyer and buy this fear and oversold positioning in OMCs? Clearly the market is hunting for value here. The second thing that the market is looking for is a bit of cushion or a safety net which is available during volatile times. So yes, OMCs qualify for that after the huge amount of correction that we have seen because of the rise in crude prices, but I think the government has been extremely prudent in not coming out with populist policies and cutting the prices. OMCs offer good value in terms of yield as well as in terms of capital appreciation for the next six months. They could be a good tactical bet but of course, are not portfolio stocks for the next two, three years. So, one should look at a 6-9 month horizon if it offers good value. Do you believe that after the current decline some of these PSU banks could be buying opportunities or would you still avoid them? We will clearly avoid the space as of now because a semblance of stability was arriving in terms of numbers in the last couple of quarters following a clear recovery or at least NPAs were starting to show a declining trajectory. But now the overhang will always be which banks will merge into which banks post the merger among the three PSU banks. The news of that merger has again cast a shadow over other banks as well. It is clearly an uncertain territory right now. Rather, if the private banks correct a little more, they would be a more sound or a robust buy rather than PSU banks which is again just playing the cycle or the valuation game which would not catch up in the next 6-9 month timeframe. For the next one year, between ICICI Bank and HDFC Bank, which one will you buy? ICICI Bank for the next six months or a couple of quarters or three quarters, looks extremely good in terms of valuation catch-up. HDFC Bank is always a crowded trade and a good amount of money can shift on a tactical basis to ICICI in terms of valuation catch-up and in terms of whatever cleanup is happening. But purely for an investor perspective in the portfolio stock, we would never suggest an HDFC Bank as a sell. It is clearly a buy with a three, five-year objective where 17-18% can be easily made. HDFC Bank looks very boring but it easily makes 17-18% type CAGR returns for you for the next five years. The same can’t be said for ICICI Bank which can probably make 25% or 30% in a year’s time but I do not know about the next three, five years.

from Economic Times https://ift.tt/2PWaRcN