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Motilal Oswal Report
The brokerage remains constructive on the sector as it expects the banking stocks' performance such as ICICI Bank, HDFC Bank, SBI, and AU Small Finance Bank etc. to improve going ahead, aided by an impending recovery in earnings and an improving macro. Additionally, management commentary is turning constructive, which, coupled with credit demand pickup, will boost investor sentiment.
Growth and earnings outlook remain strong
Motilal Oswal expects the banking system credit to grow at a CAGR of around 14% over FY26–28, supported by strong demand across corporate, retail, and MSME segments.
Sector earnings are also projected to improve, with overall earnings CAGR estimated at ~15%, while private banks are expected to deliver a stronger ~21% CAGR, significantly outpacing PSU banks.
Preferred picks across segments
Among banks, ICICI Bank, HDFC Bank, SBI, and AU SFB remain the top picks, backed by strong balance sheets, improving growth visibility, and favourable valuations.
In the NBFC space, the brokerage prefers Shriram Finance, L&T Finance, Aditya Birla Capital, PNB Housing Finance, Piramal Finance, and CreditAccess Grameen, citing healthy disbursement growth and improving asset quality.
Within insurance, SBI Life, Canara HSBC Life, and ICICI Lombard are seen as key beneficiaries of a favourable product mix and improving profitability trends.
Motilal Oswal is also positive on capital market plays such as HDFC AMC and Nuvama Wealth, supported by rising retail participation and strong inflows.
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