CLSA positive on large corporate banks, reduces weight on IT

Foreign institutional investors (FIIs) had raised weight on IT in June by almost 90 basis points (bps) and moved out of banking by nearly 75 bps, said Vikash Kumar Jain, investment analyst at CLSA in an interview with CNBC-TV18.

He believes, the market is at the cusp of reversing this shift. “The flow in June was in IT, but we believe that we might be at the cusp when all of this reverses in the coming months in favour of banks. We like banking a lot more, we have reduced our weight on IT last month. As confidence in playing the core economic growth rises, with vaccination picking up, continued relaxation of state lockdown on a gradual basis and the banking results coming in this time, may allay the worst fears – and may also trigger a shift back into banking and from IT as well,” he explained.

Within the overall banking space, he likes large corporate banks the most. “Within banks, we would want to be focused on two kinds of banks. Larger banks are the ones where there is significant buffer provisioning and that is where we are more comfortable at this stage. Even amongst the larger banks, there is this set of banks largely that are typically known as corporate banks, which saw a pretty big derating over the last five-seven years. With all of the larger part of the corporate stress behind us, that is the place where there could be a sharper rerating as well. So, we like large corporate banks the most within the overall banking space,” he shared.