Jefferies Picks 3 Indian Banks With Up to 21% Upside

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AuthorAnanya Iyer|Published at:
Jefferies Picks 3 Indian Banks With Up to 21% Upside
Overview

Global brokerage Jefferies has identified Axis Bank, IndusInd Bank, and Kotak Mahindra Bank as top investment picks in India's private banking sector. Citing steady credit demand and attractive valuations, the firm forecasts potential upside of up to 21% for these lenders, setting specific price targets based on robust financial metrics and strategic growth prospects.

Jefferies has pinpointed three Indian private banks as prime investment opportunities. Axis Bank, IndusInd Bank, and Kotak Mahindra Bank are highlighted with 'Buy' ratings and significant upside targets. The brokerage firm's report points to a sector benefiting from steady credit demand and attractive current valuations.

Banking Sector Outlook

The overall banking sector shows mixed progress, with some institutions focusing on balance sheet repair while others achieve record highs. Jefferies maintains a positive view on the sector's ability to deliver strong returns. Industry-wide credit expansion is noted to be between 10% and 12%.

Top Picks Detailed

Axis Bank: Rated 'Buy' with a ₹1,530 target, implying a 21% upside. The bank delivered robust Q4 performance with 14% credit expansion, its strongest momentum in six quarters, and a 15% deposit increase. Valuation considers its core bank at 1.7x Dec 27 adjusted price-to-book, factoring in its insurance, finance, and asset management arms.

IndusInd Bank: Rated 'Buy' with a ₹1,050 target, suggesting a 16% rise. A planned consolidation in microfinance and corporate lending led to a Q4 loan drop, but early signs of recovery in auto and SME sectors are emerging. A strong turnaround is expected by FY27 with the incoming CEO. The bank is valued at 1.2x its Dec 27 adjusted book value per share.

Kotak Mahindra Bank: Rated 'Buy' with a ₹2,650 target, predicting a 21% increase. Q4 loan growth was 16% year-on-year and deposits rose 15%, with a notable 12% growth in low-cost CASA deposits, showing stronger pull. The brokerage values the core banking business at 2.2x Dec 27 adjusted price-to-book, citing its lead in wealth and investment banking.

Jefferies believes these specific banks are positioned to benefit from upcoming leadership changes and better market settings, differentiating consistent players like Axis and Kotak from turnaround opportunities like IndusInd.

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