The markets have been volatile as the violence across West Asia continues. In the current scenario, Axis Securities is betting on three largecap banking stocks in their ‘top picks’ for April. The brokerage firm sees as much as 46% upside in one of the stocks.
Here is a detailed analysis of the investment rationale –
Axis Securities on State Bank of India
State Bank of India‘s performance has been the best amongst the larger banks, and the bank remains well-poised to sustain its performance, said Axis Securities while choosing its Top Picks for the month. SBI has upgraded its credit growth guidance to 13-15%, driven by a strong corporate revival and resilient RAM momentum.
This led the brokerage to maintain its ‘Buy’ rating on the stock, with a target price of Rs 1,350, implying an upside of 38% from the current market price.
The bank’s ability to maintain margins given its disciplined risk-adjusted pricing and continued focus on retail, granular CASA deposits should enable SBI to maintain margins at more than 3% over the medium term.
Axis Securities on Bajaj Finance
Axis Securities set a target price of Rs 1,150 over the next 12 months on Bajaj Finance, looking at an upside of 43% from the current market price.
The brokerage house expects the company to deliver a healthy AUM of 24%, Net Interest Income of 22%, and earnings growth of 27% CAGR over FY27-28, driven by three major factors. The first one is steady NIMs, helped by operating leverage, driving cost ratio improvement. Lastly, the company’s downward-trending credit costs are backed by asset quality improvement.
“We expect BAF to deliver a RoA and RoE of 4.3-4.4% and 19- 21% over FY26-28, broadly in line with the management’s long-term guidance,” said the brokerage.
However, Axis Securities said that it expects the company to revert to its AUM growth trajectory of 24% CAGR from FY27 onwards as stress in the MSME book recedes and the captive finance book runs down. With limited scope for CoF improvement and portfolio mix remaining broadly stable, it is expected that NIMs will remain rangebound between 8.7-8.8% over FY27-28.
Axis Securities on Kotak Mahindra Bank
Axis Securities, with its ‘Overweight’ rating on financial services, sees Kotak Mahindra Bank as its third largecap Top Pick for the month. The brokerage has a ‘Buy’ rating on the stock, with a target price of Rs 515, seeing an upside of 46% from the current market price.
The brokerage said that the lender is well-poised to deliver sustained, high-quality growth supported by improving asset quality trends in the unsecured book, resulting in a steady decline in credit costs and a calibrated ramp-up in unsecured lending.
With unsecured stress normalising and growth engines gaining traction, Kotak Mahindra Bank is well-placed to sustain healthy 17% credit growth over FY26-28, while preserving profitability and balance sheet strength.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.