In any business, there is a simple correlation between the price of raw materials and margins. Lower the raw material prices, higher the margins. What is the raw material in the case of banks? It is money. So, if the cost of money is headed south, does it make sense to have a closer look at banks? Probably – even though it is tough to think of buying in the midst of a major correction. As an investor, however, what happens to the Nifty and Sensex today or a month down the line should not be a deciding factor. What matters is the trend in the numbers of the industry, and that is where banks – especially PSU banks – are ticking all the right boxes.
