State Bank of India (SBI): Axis Securities maintained its 'Buy' rating on SBI with a target price of ₹1,350, suggesting a 38% potential upside. This positive view is based on SBI's upgraded credit growth forecast of 13-15%, fueled by a recovering corporate sector and steady retail demand. The brokerage expects SBI to sustain net interest margins (NIMs) above 3% in the medium term, supported by its risk management and strong base of current and savings account (CASA) deposits. As of April 2026, SBI's trailing twelve-month (TTM) P/E ratio was approximately 10.5. This valuation is considered attractive when compared to peers and the wider banking sector. Despite recent market fluctuations, SBI's stock has shown resilience, declining only about 1% in the past three months, positioning it as a defensive large-cap stock.
Bajaj Finance: Axis Securities reiterated its 'Buy' call for Bajaj Finance, setting a target price of ₹1,150, indicating a 43% potential upside. The firm forecasts strong growth, with expected Compound Annual Growth Rate (CAGR) of 24% for Assets Under Management (AUM) and 27% for earnings over FY27-28. This growth is expected to be driven by stable NIMs, operating leverage, and improved asset quality leading to lower credit costs. Projected Return on Assets (RoA) and Return on Equity (RoE) are between 4.3-4.4% and 19-21% respectively for FY26-28. The brokerage noted that a return to 24% AUM growth is anticipated from FY27 onwards. NIMs are expected to stay within the 8.7-8.8% range over FY27-28 due to limited improvements in funding costs and a steady portfolio mix. As of April 2026, Bajaj Finance's TTM P/E ratio was around 27.1, with some reports placing it between 28.09 and 28.20, classifying it as a growth stock. Its 52-week trading range was ₹1,102 to ₹788 in early April 2026.
Kotak Mahindra Bank: The bank is also named a 'Top Pick' with an 'Overweight' rating and a target price of ₹515, implying a 46% upside potential. Axis Securities forecasts sustained, high-quality growth, supported by improvements in asset quality within its unsecured loan book. This is expected to lead to lower credit costs and a measured expansion in unsecured lending. The bank is projected to achieve 17% credit growth from FY26-28, maintaining profitability and balance sheet strength. However, Kotak Mahindra Bank trades at a premium to some industry averages. Its TTM P/E was reported around 30.6 by one source, though others cite lower figures like 19.06 or 22.3. The stock has underperformed significantly, falling 21.04% year-to-date and 19.29% over the past year, lagging the Sensex.
Valuation and Competitive Landscape
Compared to its private sector counterparts, State Bank of India, with a TTM P/E of around 10.5, appears significantly undervalued. For context, HDFC Bank traded at a TTM P/E of roughly 15.6x, ICICI Bank at 15.2x, and Axis Bank at 14.13x. SBI's valuation discount, about 16% below the banking sector's average P/E of 22, suggests potential for a market re-rating. Although SBI has a strong long-term track record, outperforming the Sensex over one, three, five, and ten-year periods, its recent short-term momentum has weakened, with a notable decline in the past month.
Bajaj Finance's P/E ratio, around 27-28, aligns with its status as a growth stock, reflecting expectations of future earnings growth. This multiple is higher than that of large-cap bank peers, consistent with its focus on expanding its loan book. The company's stock has also experienced a downturn, with a 2.00% price drop on April 2, 2026, and a -3.66% change over the past year.
Kotak Mahindra Bank's valuation warrants discussion. Despite Axis Securities' target implying a 46% upside, recent data shows a TTM P/E around 30.6. This is higher than peers like HDFC Bank and ICICI Bank and significantly exceeds the broader private banking sector average of 22.0. The bank's stock has faced considerable pressure, hitting a 52-week low of ₹350.95 on April 2, 2026. This performance indicates cautious market sentiment, possibly due to its reliance on unsecured lending and general sector headwinds, despite Axis Securities' optimistic recommendation.
Sector Context and Analytical Insights
The banking sector faces a complex landscape shaped by geopolitical tensions in West Asia. These conflicts have driven oil prices up and caused supply chain disruptions, which could slightly affect asset quality. Gross non-performing assets (NPAs) might increase by 10-20 basis points, with MSMEs being the most vulnerable. However, overall asset quality is expected to remain resilient, as large corporates are well-protected. Sector credit growth is projected to moderate to around 13% in FY27. Deposit growth is trailing credit expansion, potentially leading to higher short-term funding costs. Banks anticipate a gradual recovery in Net Interest Margins (NIMs) due to deposit repricing after the RBI's rate cuts in 2025.
SBI's TTM P/E of 10.5 remains significantly lower than peers like HDFC Bank (15.6x) and ICICI Bank (15.2x), marking a substantial discount. This positions it as a value play among large-cap banks, noted for its long-term resilience and outperformance against the Sensex over various periods.
Bajaj Finance's higher P/E ratio reflects its growth strategy. The company's aim to return to 24% AUM growth from FY27 onwards suggests a period of recalibration. Profitability is supported by a diverse lending portfolio and technology, but potential stress in the MSME book and stable portfolio mix affecting NIMs are factors to monitor.
Kotak Mahindra Bank's recent underperformance, down 20% in three months, contrasts with Axis Securities' optimistic target. Increased exposure to unsecured lending drives growth but heightens risk, especially if asset quality declines. The stock's 52-week low near ₹350.95 as of April 2, 2026, underscores market concerns.
Key Risks and Bear Cases
Despite Axis Securities' positive recommendations, several risks warrant investor caution.
For State Bank of India, while its valuation is attractive, its large balance sheet and status as a public sector undertaking might lead to slower technology adoption or greater susceptibility to regulatory changes compared to private banks. Its recent weak short-term momentum and decline reflect broader market sentiment, even with its defensive qualities.
Bajaj Finance, a leader in consumer finance, faces challenges due to its reliance on borrowing for expansion. Its stock performance has recently declined. While asset quality is improving, stress in segments like MSME loans, potentially exacerbated by geopolitical impacts, could pose a threat. Furthermore, its NIMs are expected to remain stable, limiting near-term net interest income growth. Its high P/E ratio could face pressure if growth expectations are not met.
Kotak Mahindra Bank presents a more significant bear case. The brokerage's target price implies a substantial 46% upside, yet the stock has fallen 20% in the last three months. Its heavy reliance on unsecured lending, though a growth driver, carries concentrated risk. Amid sector-wide margin pressures and rising funding costs, and considering its valuation premium despite underperformance, any misstep in asset quality management or credit growth could lead to further decline. The stock recently hit its 52-week low, signaling prevailing market skepticism. Competitively, peers like ICICI Bank and HDFC Bank, with more diversified revenue and stronger deposit bases, might be better positioned. Kotak Mahindra Bank's TTM P/E of around 30.6 appears high given its recent performance and sector averages.
Future Outlook
The banking sector is expected to balance potential NIM recovery and steady loan growth against macroeconomic uncertainties and geopolitical risks. Investors should consider Axis Securities' recommendations for SBI, Bajaj Finance, and Kotak Mahindra Bank alongside broader market sentiment, competitive positioning, and individual risk profiles. The sector's ability to manage funding costs and asset quality amid global volatility will be key for sustained performance in FY27.