India’s financial sector has gone through a weak month in terms of price performance. However, the global brokerage house, Jefferies, is leaning into select names in this sector and reiterated ‘Buy’ ratings on a handful of banks, non-banking financial companies (NBFCs), and insurance players.
The report points to steady credit growth, improving asset quality, and stable liquidity even as bond yields and global tensions weigh on sentiment. Against that backdrop, the brokerage has identified five stocks where it sees earnings visibility and medium-term upside supported by operating trends rather than momentum.
Jefferies on ICICI Bank: ‘Buy’
Jefferies has a ‘Buy’ rating on ICICI Bank with a target price of Rs 1,730, which implies an upside of around 28% from current levels. The brokerage is building its case around steady loan growth, stable margins, and resilient asset quality. The brokerage expects loan growth to track around 15%, broadly in line with the system, while deposit growth is not seen as a constraint. It notes that the bank continues to balance retail and corporate segments while maintaining pricing discipline. Management commentary in the report suggests that profitability will remain the key focus, with return on assets staying above 2% over the medium term.
Jefferies adds that margin pressure from higher wholesale funding costs may show up in the near term, though benefits from lower cash reserve ratio and retail deposit repricing could offset some of this. On asset quality, the report points to stability across segments, including early signs of improvement in unsecured retail.
“Management stated that asset quality is stable across segments, despite the ME conflict,” the report notes.
Jefferies on Kotak Mahindra Bank: ‘Buy’
Kotak Mahindra Bank is rated ‘Buy” with a target price of Rs 530, translating into an upside of roughly 42% from current levels, the highest among the stocks in this set, with a focus on improving business momentum and a cautious but constructive growth outlook. The brokerage notes that loan growth is expected to be 1.5 to 2 times nominal gross domestic product growth, although management remains watchful given global uncertainties.
The report highlights that the bank is selectively growing unsecured lending, particularly in affluent segments, while using credit cards as a cross-sell tool. Deposit strategy is tilted toward shorter duration deposits in the 9 to 12 month range, along with improving current account savings account trends.
Jefferies points out that margins could face some pressure due to elevated wholesale deposit rates, though the bank is attempting to offset this through a mix shift toward higher yielding segments. Asset quality remains stable, with no immediate signs of stress across portfolios.
“Management clarified that asset quality trends in 4Q will not be impacted from the ME conflict as there are no signs of any stress across portfolios,” the report says.
Jefferies on Cholamandalam Investment and Finance: ‘Buy’
Cholamandalam Investment & Finance has been assigned a ‘Buy’ rating with a target price of Rs 2,040, indicating an upside of about 36% from current levels. Jefferies sees strong growth momentum across vehicle finance, home loans and small business lending, with assets under management expected to grow 20% to 25% in FY27.
The brokerage notes that commercial vehicle demand is more linked to freight availability and load movement rather than fuel prices, which supports resilience in disbursements. The company is also expanding into new geographies beyond its traditional markets.
Jefferies’ Top 5 Financial Sector Picks
Cost of funds is expected to remain stable over the next few quarters, while margins may see a slight improvement. Asset quality has been improving sequentially, and credit costs are expected to moderate gradually.
“Asset quality trends have been healthy with sequential improvements over Jan to March,” Jefferies says.
Jefferies on Shriram Finance: ‘Buy’
Shriram Finance carries a ‘Buy’ rating with a target price of Rs 1,220, which implies an upside of around 21% from current levels. Jefferies expects steady growth in vehicle finance and micro, small and medium enterprise lending, with assets under management projected to grow 18% to 20% in FY27.
The report notes that any impact from global tensions may show up with a lag, given the nature of vehicle financing cycles. For now, collections remain stable and there are no signs of stress in small business portfolios.
A key factor identified by the brokerage is the expected improvement in cost of funds following the investment by Mitsubishi UFJ Financial Group, which could support spreads even after passing on benefits to customers.
“Collections remain stable QoQ,” Jefferies adds while discussing operating trends.
Jefferies on Star Health and Allied Insurance: ‘Buy’
Star Health and Allied Insurance Company is rated ‘Buy’ with a target price of Rs 585, suggesting an upside of about 23% from current levels. The brokerage notes that the company is being selective in the risks it takes, with a greater focus on retail customers and non porting business.
The report highlights multiple levers for margin improvement, including regular price hikes, tighter underwriting of group business and lower claim servicing costs through technology adoption. Digital channels, while carrying higher upfront costs, are seen as more profitable over time due to the absence of renewal commissions.
Jefferies also points to ongoing regulatory developments and industry level initiatives aimed at improving hospital pricing transparency and standardisation, which could support better loss ratios across the sector.
“Loss ratio improvement remains a key priority,” the report says while detailing management strategy.
Conclusion
The five stocks Jefferies has rated ‘Buy’ share common traits, including stable growth, improving asset quality and disciplined management approach.
Even as bond yields have risen and global tension have led to near-term uncertainty, the brokerage’s stance suggests that these companies are positioned to hold earnings momentum. With valuationsnear lower levels compared to recent years, the report indicates that any easing in macro pressure could open the door for better stock performance over time.
Disclaimer: This article contains specific investment ratings, target prices, and valuation forecasts sourced from a third-party brokerage report. These insights are provided for informational purposes only and do not constitute an offer, solicitation, or personal recommendation to buy, sell, or hold any security. Investing in equities involves substantial risk; readers are strongly advised to consult a SEBI-registered investment advisor before making any financial decisions based on these market projections.
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