Asset quality uncertainty, weak credit growth take toll on banking funds

Fund managers say that the actual asset quality trends would emerge clearly after the December quarter of the current financial year

Banking funds have been the worst-performing equity category over the last three months even as markets have rallied over 19 per cent in this period.

The category has given less than 1 per cent returns over the same period.

Market experts attribute this weakness in performance to asset quality concerns, combined with lack of credit growth.

“The credit off-take has been weak. Extension of moratorium would delay the recognition of pain points in the system. As of now, there is uncertainty over the asset quality of the lenders,” said Deepak Jasani, head-retail research at HDFC Securities.

Analysts say banks have