BAnKs

Banking will be a terrible sector to own in coming months. We have a very negative view on banking, because we don't expect banks to deliver 15-20% earnings and lending growth, going forward, at a time when the economy is growing at 5%. If any bank is growing at that pace, then it is taking excessive risks. Banks have 30-35% weightage on Nifty, and 40% of Nifty's earnings growth this fiscal will come from banks, and we estimate 12% earnings growth for Nifty. The stricter (hopefully) KYC norms, post the money-laundering expose, are likely to hit banks' growth. Banking is the worst business in the world, because the core business of borro--wing and lending does not make any sustainable money ever, because core banking is a pure commodity business. So you have to use exce--ssive leverage, venture into hugely risky areas like prop trading, derivatives, sub-prime, money laundering. Most major banks in the world have done and are still doing this, to make a living and juice up earnings. And then, all you need is a small cut on your asset value to wipe out your net worth. It's not the banks' fault. It's just a trash business. I pity all the folks who will get a bank licence now. It's going to be exactly the same situation as telecom aspirants found themselves post 2008. Half the industry wound up in jail. I just hope folks don't go to jail like in telecom.