In a significant shift in its investment strategy for the Indian banking sector, Antique Stock Broking has announced a preference for large private banks over their public sector counterparts. The brokerage, in a report dated May 25, 2026, highlighted a re-evaluation of valuations and risk-reward dynamics following the March quarter results.
Private Banks Present Favorable Risk-Reward
Antique Stock Broking now places HDFC Bank, ICICI Bank, and Axis Bank at the top of its pecking order within the larger private banking segment. This preference stems from what the firm describes as favorable risk-reward propositions, with valuations of these large private banks currently sitting at decadal lows.
The brokerage suggests that these lower valuations could reverse upwards, particularly with anticipated earnings upgrades in the event of future central bank rate hikes. Taking a two-year view, Antique projects potential repo rate hikes of approximately 100 basis points, which could significantly impact margins and growth positively for these lenders.
PSU Bank Trade Concludes Amid Macro Concerns
Conversely, Antique Stock Broking believes the 'PSU bank trade' has concluded. Public Sector Undertaking (PSU) banks experienced a relatively higher de-rating post-results compared to private banks, primarily due to an inch-up in G-Sec yields. Macroeconomic concerns, including the West Asia crisis driving government security yields, the upcoming transition to the Expected Credit Loss (ECL) framework, and potential wage revision provisions from FY28, have contributed to a bleak outlook on Net Interest Margins (NIMs) for PSUs.
Despite the overall sentiment, State Bank of India (SBI) remains Antique's preferred pick within the PSU segment. Union Bank and SBI, however, saw notable price declines of 18% and 11% respectively, even with earnings downgrades.
Top Picks and Rationales
Large Private Banks:
- HDFC Bank: Valued at 1.3 times FY28 Price-to-Book (P/B), similar to Axis Bank and lower than some mid-sized banks, despite superior return ratios and a strong liability franchise.
- ICICI Bank: Underperformed Bank Nifty post-results; considered undervalued given strong Q4FY27 growth and favorable margin outcomes in the current rate cycle.
- Axis Bank: Also noted for its attractive valuation and potential for upside.
Smaller Private Players:
- Ujjivan SFB: Favored as a play on the microfinance (MFI) cycle resurgence, with better underwriting capabilities evident in past cycles.
- Bandhan Bank: Expected to report improved return ratios in FY27 and presents a strong valuation perspective.
- Federal Bank: Chosen for its Return on Asset (RoA) improvement levers and better-than-expected execution in enhancing its liability franchise.
Other Mentions:
Antique also highlighted Indian Bank and Bank of Maharashtra (BoM) for their good operational numbers and recent corrections that have made their Price-to-Book valuations more palatable.
The brokerage's analysis underscores that while market multiples have priced in negatives such as higher bond yields and deposit competition, future central bank rate actions could serve as a crucial catalyst for stock outperformance.