Goldman Sachs analysts have highlighted that the recent sharp correction in private bank stocks, following post-election results, presents a buying opportunity. These stocks experienced a significant recovery within two days, rebounding from the initial decline due to uncertainty surrounding the election verdict.
HDFC Bank, ICICI Bank, Axis Bank, IndusInd Bank, and Federal Bank saw their shares surge by up to 8% over two days, compared to a 4% rise in the benchmark Nifty 50 index during the same period. Goldman Sachs remains optimistic about HDFC Bank, Kotak Bank, Axis Bank, and IndusInd Bank.
Emphasising the importance of fundamentals over prevailing narratives, Goldman Sachs stated, “We continue to favor private banks over public sector undertakings (PSUs).”
The performance
In Q4FY24, private banks demonstrated robust credit growth at 30% year-on-year. According to the latest Reserve Bank of India (RBI) data, the overall credit growth for the banking system remained healthy at 20% YoY in May 2024, bolstered by the merger of HDFC and HDFC Bank. Adjusted for the merger impact, credit growth stood at 16%.
Kotak Institutional Equities also noted that banks reported strong Q4FY24 results, with operational profitability holding steady. Additionally, asset quality continued to improve, and the proportion of delinquent loans on balance sheets continued to decline.
Julius Baer remains optimistic about private banks, noting that India recorded 7.8% GDP growth YoY 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, it said.
