4 Banking Stocks That HDFC Securities Has A "Buy" Call On

Broking firm HDFC Securities has recommended buying the stocks of Axis Bank for a target price of Rs 1197, as also State Bank of India for a target price of Rs 724. ICICI Bank and City Union Bank are the other stocks that the brokerage has a buy call on for good gains. The brokerage has a Rs 1105 target price on the stock of ICICI Bank, while the target price on City Union Bank it is Rs 230.

"Given the RBI's recent pause in the policy rate cycle, we believe that the banking system, although largely resilient to the fallout from global banks, is faced with a combination of demand deceleration (lower growth), higher funding costs (lagged deposit re-pricing) and softer incremental spreads," HDFC Securities has said in its report.

"As banks and NBFCs navigate the growth-margin trade-off, we argue that the combination of lower growth and lower spreads is not priced into valuations, especially of mid-sized, high-growth franchises.

While we hold our below-consensus growth forecasts, we are now equally conservative on incremental spreads across our coverage universe. Our hypothesis remains anchored around strong retail deposit franchises, and normalising spreads over the next 12 months, cushioned by benign asset quality trends. Our top picks are ICICI Bank (Target price: Rs 1,102) and SBI (Target price: Rs 724) among large banks and CIFC (Target price: Rs 885) and SBI CARD (Target price: Rs1,020) among NBFCs," the brokerage firm has said.

Indian banking system resilient

According to HDFC SEcurities, the Indian banking system was largely insulated from the financial sector accidents in the west including the near-collapse and subsequent regulator-brokered bail-out of a systemically important bank in Europe and the collapse of some regional banks in the US.

"We believe that the Indian banking system stands capable of withstanding any second-order shocks from these fallouts, thanks to the combination of granular retail deposit-funded institutions, sufficient capital and liquidity buffers, prudent regulatory framework, and continuous monitoring and support from the RBI," the brokerage has said.

Disclaimer
The above-mentioned information is purely informational and highlights the stock recommended by HDFC Securities. Greynium Information Technologies, the Author and the brokerage firm are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.