It is often said that if you want to invest in India, then financial services is the backbone of the country. However, the banking sector has been underperforming following the pandemic-induced lockdown. But it remains to be seen, how long can this underperformance last?

Vinay Sharma, Fund Manager at Nippon India MF, is of the view that the company was incrementally positive on the financial sector. "A lot of negatives that were imagined at the beginning of the crisis, we believe a lot of those are incrementally turning positive over the last few months," he said.

Sharma added that banks have made lesser provisions on account of the pandemic and valuations are now fairly supportive.

Gautam Chhugani, Dir-Financials and Fintech at Bernstein elaborated that the concerns surrounding banks are abating. He stressed that the sector is getting consolidated and that they are expecting more mergers and acquisitions (M&A) in future.

Chhugani highlighted that well established NBFCs would continue to thrive. "Every vertical has some leading franchises where you can look at them from a long term basis. So, like in other parts of the sector, they are going through recuperation and moratorium, and consolidating their asset quality, but if you look at the leading franchises, they are surviving and they will continue to thrive in the long run," he said.

Chhugani said that Kotak Mahindra Bank, ICICI Bank and SBI Cards were favoured by Bernstein.

(Edited by : Jerome Anthony)