Banking shares to purchase: India’s banking and monetary sector emerged from the Q4FY26 earnings season with bettering asset high quality, secure credit score progress and moderating credit score prices, prompting brokerages to show more and more optimistic on choose lenders and NBFCs for the medium time period.
In accordance with a report by Axis Securities, the general outlook for the BFSI house stays constructive regardless of exterior dangers linked to geopolitical tensions and elevated world uncertainty. The brokerage believes bettering operational effectivity, secure asset high quality and regular mortgage progress might proceed supporting earnings momentum throughout a number of banking and monetary names over the subsequent two years.
“Banks witnessed restoration in company demand together with regular retail demand, whereas stress in unsecured portfolios continued to ease throughout segments and geographies. Credit score prices declined meaningfully throughout the quarter, aiding earnings progress throughout the banking universe,” mentioned Axis Securities in its BFSI Q4FY26 outlook report.
The brokerage believes most banks are coming into a extra secure asset high quality cycle after stress in unsecured retail segments moderated sharply throughout latest quarters. Axis Securities additional mentioned the sector’s bettering asset high quality developments stay one of many greatest positives rising from the March quarter earnings season.
The report added that mid-sized non-public banks and small finance banks might proceed to outperform bigger friends by way of mortgage progress and margin enchancment over the medium time period, whereas PSU banks are anticipated to profit from bettering working effectivity and decrease stress formation.
Axis Securities has recognized a number of “high conviction concepts” throughout non-public banks, PSU banks, small finance banks and NBFCs following the Q4FY26 earnings season.
ICICI Financial institution: ICICI Financial institution stays considered one of Axis Securities’ high non-public banking picks with a “Purchase” ranking and a goal worth of ₹1,700. The brokerage highlighted the financial institution’s bettering credit score progress momentum, secure margins and benign credit score price outlook as key positives.
Axis expects ICICI Financial institution to ship practically 16% CAGR credit score progress over FY26-FY28 whereas sustaining secure asset high quality developments regardless of geopolitical uncertainties. The brokerage additionally believes the financial institution’s unsecured portfolio stress has eased considerably.
“Administration stays assured that benign credit score price developments will proceed, with credit score prices being contained at sub-50 bps going forward,” Axis Securities mentioned whereas discussing ICICI Financial institution’s outlook.
Kotak Mahindra Financial institution: Kotak Mahindra Financial institution has additionally obtained a “Purchase” advice from Axis Securities with a goal worth of ₹500. The brokerage believes the worst of the unsecured mortgage stress cycle is now behind the financial institution.
In accordance with the report, decrease slippages, bettering assortment effectivity throughout bank cards, MFI and industrial car loans, together with bettering charge earnings prospects, might assist earnings restoration going ahead.
Axis Securities additionally highlighted Kotak Mahindra Financial institution’s ongoing digitisation and automation efforts, that are anticipated to enhance operational effectivity and regularly decrease price ratios over FY27 and FY28.
State Financial institution of India: Amongst PSU lenders, SBI stays Axis Securities’ most popular decide with a “Purchase” ranking and a goal worth of ₹1,285.
The brokerage highlighted SBI’s broad-based mortgage progress throughout retail, agriculture and company segments, together with rising publicity to rising sectors equivalent to renewable power, transmission and semiconductor ecosystems.
Axis Securities expects SBI to ship practically 14% CAGR advances progress over FY26-FY28, supported by sturdy traction in retail and company credit score demand. The brokerage additionally believes SBI’s bettering charge earnings technique and secure asset high quality developments place it nicely for sustained profitability progress.
Federal Financial institution: Federal Financial institution was one other most popular mid-sized banking thought with Axis Securities assigning a “Purchase” ranking and a goal worth of ₹340.
The brokerage highlighted the lender’s bettering CASA combine, calibrated deposit repricing technique and wholesome asset high quality profile as key strengths. It additionally famous that Federal Financial institution has restricted direct publicity to Center East-linked dangers regardless of ongoing geopolitical uncertainty.
Ujjivan Small Finance Financial institution: Ujjivan Small Finance Financial institution additionally featured amongst Axis Securities’ high conviction concepts with a goal worth of ₹78.
The brokerage mentioned the lender’s deal with diversifying its mortgage e-book and rising the share of secured loans might assist stronger and extra secure progress over the medium time period. It expects the financial institution’s secured portfolio progress to stay sturdy in FY27 whereas credit score prices proceed to reasonable regularly.
Bajaj Finance: Amongst NBFCs, Bajaj Finance remained considered one of Axis Securities’ high picks with a goal worth of ₹1,160.
The brokerage expects bettering asset high quality, decrease credit score prices and robust buyer additions to assist earnings progress going ahead. Axis Securities believes Bajaj Finance’s AI-led operational effectivity initiatives and broad-based AUM progress might assist enhance return ratios additional in FY27.
Together with banks, Axis Securities additionally stays constructive on choose NBFCs equivalent to Shriram Finance and CreditAccess Grameen, citing bettering asset high quality developments, wholesome progress outlook and secure margins as key funding drivers.
Disclaimer: The views and suggestions made above are these of particular person analysts or broking corporations, and never of Mint. We advise traders to verify with licensed specialists earlier than making any funding selections.
