Also, since businesses are shut, demand for loans by small-and-medium enterprises (SMEs), autos, and even corporates will also be adversely impacted.
So, my question is where will the growth come from? HDFC Bank management sounded very optimistic in an interaction with a TV channel on Monday regards overall growth; but, I want to understand how will this be possible.
Lenders such as HDFC Bank or ICICI Bank have decent capital adequacy and there won't be any liquidity issue for them. They were enjoying premium valuation because of high growth but in this environment, it is difficult for them to grow at previous levels of 18-20 per cent.
From an investment point of view, investors should understand that banks will take a hit from all the sectors and not any particular segment. So, those who intend to buy shares of banks should have at least three years of investment horizon. If any sector of the economy is in trouble, it will have an impact on the banking sector.
Siddharth Purohit is a research analyst at SMC Institutional Equities. Views are his own.
(As told to Swati Verma)