Gold Silver Reports — Shares of India’s banks may be set for a pullback, according to Vikas Gattani, chief investment officer at Singapore-based fund manager Progress Asia Capital and Advisors Pte.

“In the absence of any sharp uptick in banking credit and a major redressal in the banks’ balance sheets via capital injection or otherwise, we fear that this sector could severely correct if the earnings do not keep pace with expectations,“.

The S&P BSE India Bank Index, a gauge of the nation’s largest lenders, reached a record high on August 1. Indian stock indexes are among the best-performing equity gauges in major Asian markets this year, boosted by purchases of nearly $17 billion of local equities by foreign investors and domestic funds.

“The worrying trend in the current rally has been the narrowing breadth of the market, as the financial services sector (which constitutes 30% of the index) continues to significantly outperform and overshadow the underperformance of other sectors,“ Gattani wrote in his letter to investors.

“The rate of liquidity is driving this market, and at some point a pullback is warranted,“ he said by phone.

The Progress India Opportunities Fund added 2.4% in July, bringing gains for 2017 to 23.4%. The longshort Indian equity strategy has returned an annualised 15% since inception in December 2014. — Neal Bhai Reports