Motilal Oswal Reveals Top Banking Picks for Q4 FY26; HDFC, SBI, ICICI Lead

BANKINGFINANCE

Overview

Brokerage Motilal Oswal anticipates steady traction in the Indian banking sector for Q4 FY26. Strong retail lending from HDFC Bank and ICICI Bank, coupled with robust MSME demand for State Bank of India, underpins this positive outlook. Public sector banks are noted to be gaining market share. Motilal Oswal reiterates its top picks: HDFC Bank, ICICI Bank, SBI, and AU Small Finance Bank.

Sector Outlook

Motilal Oswal's recent analysis for the fourth quarter of fiscal year 2026 indicates steady growth in the banking sector. This positive trend is driven by strong performance in both retail lending and the Micro, Small, and Medium Enterprises (MSME) segment. Banks are actively using their extensive networks of distributors and agents to boost retail product sales.

Lending Performance

HDFC Bank and ICICI Bank are leading the way in retail lending, showing consistent results. State Bank of India is seeing high demand in MSME lending, with relationship managers managing a strong pipeline of new business. Public sector banks are becoming more competitive, capturing market share by offering attractive home loan rates and faster processing.

Asset Quality and Strategy

Across the banking sector, asset quality is holding steady. However, banks are closely monitoring loans to industries that depend on export demand or face volatile commodity prices. Kotak Mahindra Bank is highlighted for its focus on selective, relationship-based lending and making its processing more efficient. Although the real estate market shows some signs of slowing, this has not significantly impacted overall loan growth.

Top Picks

Motilal Oswal reiterated its confidence in four main banking stocks: HDFC Bank, ICICI Bank, State Bank of India, and AU Small Finance Bank. The firm noted that public sector banks are particularly gaining from government support for MSME growth and building strong loan pipelines.

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