Valentis Advisors sees earnings recovery in banks; cement sector next on watchlist

Banks are emerging as a favourable investment opportunity as interest rate cuts begin to ease pressure on margins, according to Jyotivardhan Jaipuria, Founder and Managing Director of Valentis Advisors.Jaipuria said bank profitability should improve once rate cuts flow through the lending cycle. “Once the interest rate gets cut, then your loan rates get cut immediately, whereas deposits take some time to reprice,” he explained. With net interest margin pressure likely near a bottom, he expects margins to expand again.

“Next year, we think bank earnings will grow at 12-15%,” he said, adding that valuations remain attractive. Banks, he noted, are still trading below their 10-year average multiples.

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He is also monitoring the cement sector but prefers to wait before deploying fresh capital. The current quarter has been weak due to extended monsoons, but he expects the environment to improve. Jaipuria said consolidation over the past 18 months, steady demand and slowing capacity additions should strengthen pricing power.As a result, the sector may see “good growth” next year, with many stocks having underperformed the market and remained stable.

He believes both cyclicals, such as banks and cement, and select chemical plays, could be positioned well for the next growth phase in the market.

For the full interview, watch the accompanying video

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