The Reserve Bank of India (RBI) released the final guidelines for issuing new bank licences on Friday. Rajen Shah, Chief Investment Officer, Angel Broking believes Aditya Birla Nuvo, Bajaj Financial Services, Cholamandalam Investment and Finance Company and Mahindra & Mahindra Financial Services will be strong candidates for a banking licence.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: A word on the bank license norms? You must have gone through it. Which ones fit the bill according to you? If you had to bet on two-three which ones would be in top of your list?
We think something really big will be done in this Budget to take the markets to new highs.
A: We are betting on four companies which we believe are very strong candidates to get the banking license. First is Aditya Birla Nuvo, second is Bajaj Financial Services, third is Cholamandalam Investment and Finance Company and fourth is Mahindra & Mahindra Financial Services. The reason is that all four have very strong promoters. They have very good integrity and three of them have got very strong rural presence.
In the last 15 years, Kotak Mahindra Bank's market cap has moved up from nothing to Rs 50,000 crore. IndusInd Bank's market cap has moved up from nothing to about Rs 22000 crore and Yes Bank from nothing to almost Rs 17000 crore.
So, if any of these companies, get license, the wealth creation in these companies could be tremendous.
Q: What are the chances of a stock like IFCI, it rallied about 10 per cent last week? Within those banking license guidelines and what you went through would you say this one is a potential candidate or unlikely?
A: I would not bet on it. I am not a big fan of IFCI. It has not done anything for so many years. I am not very hopeful of this company getting that license. To get the banking license one needs a very strong promoters and with highest integrity.
Also, if they have rural presence, then that is better for these companies rather than IFCI and IDFC of the world. So, my bet would be these four.
Q: Infrastructure stocks have been under a lot of pressure. Do you think the Budget can do anything to turn the sentiment on that sector around in stocks like Jaiprakash Associates, GMR Infrastructure, etc?
A: We are very hopeful on the Budget. It is good that the market is going into Budget with lot of weakness. Frontlines have corrected five to seven per cent. Midcaps have corrected between 10-20 per cent. Not only infrastructure, it is going to be a game changer for the market this is what we believe.
The reason is that Chidambaram has very clearly said a number of times over the past few weeks that he would like investors to move little bit from gold and realty into equities. So, he is going to do something for the equity market. One of the things which we expect in the Budget is slashing of the short-term capital gains on equity from 15 per cent to 10 per cent. Over the past two years the revenue collection from short-term capital gain tax has been very dismal.
So, by doing this he will achieve two things. One, he will not lose anything on the revenue front. However, at the same time, boost the market sentiment. That is necessary and important at this point of time because of two reasons, one, Rs 10,000 crore of divestment is still pending. Next year we will probably have this target raised to Rs 30,000-35,000 crore.
So, it is in the interest of the government to keep the markets buoyant and strong. And second is that in the next 12 months we have elections. So, going into elections with a weak market mood, is not going to work well for the government.
Besides, we were also expecting hike in Equity Linked Savings Schemes (ELSS) limit from Rs 1 lakh to Rs 1.5 lakh. That will again boost the equity sentiment. We are very positive. We think something really big will be done in this Budget to take the markets to new highs.