On the banking front, Shah expressed caution following the fraud episode at IDFC First Bank, describing it as a serious issue that requires thorough system and process checks. He said the bank may not recover for the next one or two quarters until full clarity emerges and expects the stock to remain range-bound in the near term, though it could look interesting near one time price-to-book once uncertainties are resolved. He also flagged possible deposit outflows and near-term growth impact for both IDFC First Bank and AU Small Finance Bank, adding that he would avoid AU for now until more visibility emerges.
Discussing cigarette companies, Shah said government tax tinkering remains a significant overhang, keeping stocks like ITC largely range-bound and increasingly cyclical. He suggested that while attractive valuations and dividends can make these stocks appealing at lower levels, policy uncertainty limits their potential as long-term compounders.
On the broader banking landscape, Shah said PSU bank returns are cyclical and near peak levels, though they could continue to perform well over the next couple of years. He reiterated a preference for private sector banks, highlighting SBI as a key PSU name while expressing confidence in large private lenders such as ICICI Bank and HDFC Bank, particularly as margin recovery at HDFC Bank could drive outperformance.
Overall, Shah’s remarks point to a market where valuation discipline and selectivity are crucial, with opportunities emerging in beaten-down sectors like IT even as investors remain cautious on banks facing governance questions and sectors exposed to policy risks.
