According to CNBC TV18, Canara Robeco Mutual Fund is maintaining a constructive stance on large private banks amid a rising interest rate environment. Shridatta Bhandwaldar, Chief Investment Officer - Equities at the fund house cited strong credit growth momentum as a key driver. The banking sector presents an attractive setup as credit growth rebounds strongly, tracking upwards of 20% compared to the 9% to 10% levels seen at the same time last year. Large private banks and large banks in general have massively underperformed, leaving them available at valuations between 1.3 and 1.6 times price-to-book. Bhandwaldar noted that when you look at the financials, we are constructive given that right from the credit growth to the net interest margin (NIM) challenges that the banks faced, and there is no credit cost challenges as of now. However, he cautioned that the interest rate increasing setup is good for banks, and at the margin could be adverse for NBFCs.
As reported by CNBC TV18, the fund house is focusing on Tier-1 non-banking financial companies due to strong credit growth and attractive valuations. Bhandwaldar noted that when you look at the financials, we are constructive given that right from the credit growth to the net interest margin (NIM) challenges that the banks faced, and there is no credit cost challenges as of now. However, he cautioned that the interest rate increasing setup is good for banks, and at the margin could be adverse for NBFCs. He added that if the earnings were to start deteriorating in the coming quarter, given the pass-through of the raw metal prices and energy prices, then there would be a relatively more meaningful impact on some of these sectors and consumption because then people start worrying about their cash flows in future.
According to CNBC TV18, the fund is selectively adding to Indian artificial intelligence infrastructure players following recent market corrections. Bhandwaldar stated that the fund house is selectively eyeing AI infrastructure while remaining cautious on IT, citing a lack of structural earnings growth in the information technology sector. In the capital goods and industrials space, global hyperscalers and AI labs may face valuation pullbacks because the monetisation of transformational technology remains back-ended. Bhandwaldar explained that infrastructure cannot be created at any cost with the expectation that consumers will immediately pay, meaning the monetisation of these projects will suffer at the hyperscaler level. However, the recent correction in Indian AI infrastructure support players presents selective buying opportunities from a one-to-two-year perspective. Canara Robeco has been participating in these infrastructure names for three years and is using the recent pullback to re-add to specific positions where margin excesses are not built in.
