SBI | Hindalco: There are more legs for the market rally to continue: Chakri Lokapriya

What do you think of the SBI Q4 numbers?
Asset quality has been in control but do you think this relief could be short lived because we are in the midst of the second wave? Also what could be the impact of the localised lockdowns?
Well two or three things. One, all the banks have arguably gone through one of the worst periods in history with prolonged lock down last year. This year we have had the second Covid wave. Prior to the pandemic, we had fairly troubled bank balance sheets because of corporate loans. Against that backdrop, SBI and the other big banks have done remarkably well.

In the current quarter, the GNPAs have come down, net NPAs have come down, the provision cover is a phenomenal 87% and on top of that, large banks like SBI cannot grow as fast as the overall system. So it is growing at roughly the industry average of 5%. After the Supreme Court ruling on moratorium a couple of months ago, all the banks have chosen to take the entire hit in the fourth quarter. So with credit growth being at a 50-year low and with bank balance sheets far stronger than they have been in the last four or five years, post pandemic, clearly the loan growth will accelerate. From that perspective, all banks have been underperformers for over the last one year including State Bank of India and therefore the valuations look good, fundamentals are improving and there are more legs for this rally to continue.

What is your view on the overall markets? Look at the ferocity with which the market has made a comeback erasing all the losses after a two-day dip. The picture is still not very rosy for India. What direction are the markets taking?
In the last few days, we have had quite a few random events in terms of iron ore prices in China coming down with the Chinese government trying to control commodity prices. There is a fear that the US stimulus package might be cut and therefore what will happen to commodities? So all kinds of metal and commodity stocks fell.

Along with that, the domestic companies were also not doing great. It has become fairly clear that in the case of the US and the other developed markets, because of their successful vaccination drive, the economies are going to do well and therefore metals are going to do really well.

The State Bank of India result has shown that balance sheets are far stronger. So if we combine all that,

, Hindalco, State Bank of India, ICICI are looking good and are likely to take the market higher.