Goldman Sachs Highlights HDFC, Kotak As Top Picks Among Private Banks, Other Analysts Bullish Too

Analysts are bullish on the private bank sector as a large correction in these lenders could present a long-term opportunity for gains.

What Happened: Analysts at Goldman Sachs believe the steep correction after the Narendra Modi’s Bharatiya Janata Party (BJP) failed to maintain its single-party majority in parliament could offer opportunities to accumulate private bank stocks. The global investment firm remains bullish on HDFC Bank, Kotak Bank, Axis Bank and IndusInd Bank.

“The fundamentals are more important than the narrative. We continue to favour private banks over PSUs (public sector undertakings),” the brokerage firm stated in a recent note.

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Kotak Institutional Equities noted that banks reported a strong March quarter, with operational profitability holding up. Asset quality also continued to improve, while the proportion of delinquent loans on the balance sheet declined, the domestic brokerage said.

However, it noted that banks showed a declining net interest margin trend during Q4FY24. Yields were either flat or slightly higher sequentially, with some re-pricing of marginal cost of funds-based lending rate-linked loans. Looking ahead, most banks have indicated that the re-pricing of term deposits is largely complete, the brokerage said.

Julius Baer remains optimistic about private banks after India recorded economic growth of 7.8% growth year on year in the first quarter of 2024.

“While the BJP’s power may be diluted, it is still intact, and the momentum in the economy from existing reforms will not fade away,” they said.

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