Bank Sector Could Be Underperformer Over Next 1-1.5 yrs

Banking as a sector - on the aggregate - is a little expensive. The prices are reflecting a very optimistic scenario for the next several years to come. It is almost pricing in very strong and profitable growth for the next couple of years whereas we have seen that the risks have not gone away fully. The asset quality of some of the banks is still looking a little suspect and there could be a little bit of volatility going forward. With a view that deposit rates will have to go up from these levels also by about 5200 basis points, the sector may probably be an underperformer over the next 1-1.5 years given that these stocks have run up significantly in the current calendar year. So there could be a little bit of disappointment given the valuations at which most of these banking stocks are trading at.