Banks still facing deposit issues; only buying power financiers in BFSI: Daljeet Kohli

Daljeet Kohli, of Roha Asset Managers LLP, says post Friday's Monetary Policy and the 25 bps rate cut, the cost of funds may decrease a bit. However, the main issue for the sector is still deposit mobilization, which has not been addressed yet. It might take more time to resolve this. So far, the numbers for this quarter show that financial companies have stable asset quality. A growth rate of around 14-15% is also expected. But, Kohli is still not buying financial services companies, except for power financiers.

It has been a while that we have had a lot of hopes riding on the banking and the financial space. People have been talking about the fact that they are one of the sectors where the valuations have corrected quite a bit. It’s a good time to look at them. On Friday, RBI or rather the MPC cut rates by 25 bps. How does all of this augur well for the financial sector?
Daljeet Kohli: It was much anticipated that we will probably start the cycle of rate cut now and RBI has delivered on that, although with just 25 basis point cut. The market was looking at it that probably with this lot of uncertainty, especially the global uncertainty, some kind of help from the RBI would always be welcome. So, this is good.

Also Read

• What does a rate cut after 5 years mean for the economy? Dinesh Kumar Khara explains

What this will help for the financial services sector is that probably the cost of funds will ease out slightly. But the bigger concern for the sector has been on deposit mobilisation. That has still not been tackled at all. Probably that will take some more time to come across. We have seen this quarter’s numbers till now. Whatever financial companies have come out, asset quality is now very much stable. A 14-15% kind of growth is also almost in line.

Also Read

• Focus on beaten down largecaps in banking, consumption sectors: Rajat Sharma

The issue is about the cost of funds and therefore the ability to draw the deposits, etc. I think that concern will still remain while the sector has seen valuations come off sharply and now they are probably one of the most attractive ones. But as a fund house, we are still not buying any of these financial services companies, except for power financiers, because we have sovereign guarantee there and a clear trajectory of growth as well. Also, not too many issues are there on asset quality. So, barring that, we are waiting for these issues on the deposits to be resolved.

But we are turning slightly positive from totally ignoring the sector.