Indian banking sector poised for strong upcycle amid favourable macros: Morgan Stanley's Sumeet Kariwala

Sumeet Kariwala of Morgan Stanley views the Indian banking sector as entering a strong upcycle, with normalized credit costs, steady loan growth, and healthy earnings. He favors large private banks over state-owned banks long-term but notes PSUs have room to catch up in valuations due to strong macro indicators. \r

Kariwala expects continued moderate deposit rate increases over the next few quarters. He remains positive on private banks, foreseeing better revenue growth and higher returns than PSUs. Regarding NBFCs, he believes the RBI's proactive measures on unsecured loans are stabilizing the sector, with no major asset quality issues expected. \r

Kariwala prefers large-cap private banks but sees value across the private banking spectrum.