Sridhar Sivaram remains 'selectively positive' on PSU banks and sees opportunities in financials

Sridhar Sivaram of Enam Holdings believes the financial space offers opportunities across a combination of large-cap and smaller banks, while also highlighting that Non-Banking Financial Companies (NBFCs) are poised to benefit from a falling interest rate environment as their cost of funds declines.

Speaking to CNBC-TV18 at the Global Leadership Summit on Friday, November 7, Sivaram discussed the recent large Foreign Direct Investment (FDI) deals in the financial sector. He acknowledged that while this is growth capital, the recipient institutions are not without their own challenges.

“It is growth capital, but they also have issues with the bank. So it's not like they are the cleanest of the clean,” he commented.

However, Sivaram views the capital infusion as a significant positive, providing these banks with the opportunity to clean their balance sheets and pursue growth, which is essential for the broader economy. He added that his firm is invested in some small banks and also favours larger banks and the NBFC space, anticipating interest rates will remain “lower for longer.”

On the subject of Public Sector Undertaking (PSU) banks, Sivaram maintained a selectively positive stance. He noted that he has been a proponent of the PSU pack since late-2020 and that these banks have performed well, showing improvements in their Non-Performing Assets (NPAs) and loan growth.

Responding to a query about further consolidation following comments from the Finance Minister, Sivaram opined that merging the remaining four or five smaller PSU banks would not make a material difference to the sector. “I'm not very sure it'll make a material difference unless they plan to merge two large banks into one,” he explained.

Looking at near-term market cues, Sivaram believes the outcome of the Bihar state elections will not significantly impact market sentiment, suggesting a larger state election would carry more weight. Regarding a potential US-China trade deal, he expressed cautious optimism for a resolution, reasoning that pressures on President Trump, such as his declining popularity ratings and rising domestic inflation, could incentivise a deal.

Finally, Sivaram addressed the concern of a heavy supply of new share issues weighing on the market. He stated that the influx of paper, particularly from Initial Public Offerings (IPOs), is already capping the upside in the secondary market. He observed a clear preference among investors for primary market issues over comparable stocks in the secondary market. Sivaram concluded by saying he is not swayed by this “fear of missing out” (FOMO) and prefers to remain selective in participating in new offerings.