Hedge funds looking to short PSU banks, says Macquarie

Global investors are slowly turning positive on shares of Indian banks and non-banking finance companies, but are looking for better prices to start buying in a big way, says a report by brokerage house Macquarie Securities.

"A slowdown in loan growth coupled with compression in NIMs (net interest margins) is already factored into the price and analyst estimates and valuations have also become a bit more attractive, according to investors," says the report, based on feedback from investors across Asia, US and Europe.

Macquarie feels the April-June quarter earnings would provide a good buying opportunity, since the numbers.

"1Q12 results (to be declared in July) are likely to be one of the worst for Indian banks due to weak volume growth and NIM compression. On the macro-economic front, oil price continues to remain high and inflation could negatively surprise with an impending fuel price hike post state elections," the report said.

Macquarie says with liquidity expected to improve further and a likely drop in short-term rates, investors were looking to play wholesale funded institutions like YES Bank, infrastructure NBFCs like IDFC, PFC, REC.

"Many hedge funds were looking to short the PSU banking basket and go long on stocks like YES Bank, ICICI Bank," the report said.