MUMBAI: Equity mutual fund schemes dedicated to investing in public sector bank stocks, have been at the bottom of the performance charts among banking sector funds. Banking sector funds as a category, lost 11.58%, in three months ended March 28, says Value Research, a mutual fund tracking entity. Goldman Sachs PSU Bank Bees lost 16.54% and Kotak, PSU Bank ETF has lost 16.53% in last three months.
"Asset Quality of most of the PSU BANKS deteriorated as average GNPA% for PSU Banks (16 banks) increased year over year as well as quarter on quarter. With slowdown in economic growth coupled with policy paralysis, may lead to tough environment for business operations. This is key concern for banks as it may lead to further deterioration of asset quality," says Bunty Chawla, research analyst with SIHL Research in his recent note. Slowdown in loan off take and deposit mobilization has hit the net interest income and net interest margins of the banks.
The funds dedicated to PSU banks are expected to remain under pressure in near future. PSU banks face the pressure of additional provisioning for pension liabilities to be amortized for three years which will impact the earnings growth. Investors keen to take exposure to banking sector may look at private sector as they are expected to perform better due to lower provisioning pressure and higher return on assets.
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