Global brokerage Nomura has updated its list of preferred Indian banking stocks, notably removing HDFC Bank from its top selections. The decision to exclude HDFC Bank was primarily attributed to a "succession overhang" within the institution, though Nomura maintains a 'Buy' rating on the bank with a target price of Rs 950.
For large private sector banks, Nomura now favors ICICI Bank Ltd and Kotak Mahindra Bank Ltd. Within the mid-tier banking segment, its preferred picks include IDFC First Bank Ltd, Federal Bank Ltd, and IndusInd Bank Ltd.
Nomura's Target Prices for Preferred Banks
According to data compiled from Bloomberg, Nomura has set the following target prices for its favored banking stocks:
- ICICI Bank Ltd: Rs 1,700
- Kotak Mahindra Bank Ltd: Rs 460
- IDFC First Bank Ltd: Rs 95
- Federal Bank Ltd: Rs 395
- IndusInd Bank Ltd: Rs 1,145
Banking Sector Outlook and Credit Growth
Nomura's analysis highlighted a sustained system credit growth momentum in the June quarter, building on a strong March quarter despite typical seasonal weaknesses. The brokerage anticipates this robust loan growth to continue through the first half of fiscal year 2027 (H1FY27), supported by strong demand, favorable FCNR deposits, and a beneficial base effect. Growth is then expected to gradually moderate to 15 percent year-on-year (YoY) by FY27.
System credit growth demonstrated strength in July, rising 19.3 percent YoY, albeit from a lower base. Incremental month-on-month (MoM) system credit growth stood at 1.3 percent in July, primarily driven by the retail and services sectors.
Key Growth Drivers:
- Retail Growth (MoM): Led by gold loans (3 percent MoM) and vehicle loans (1.4 percent MoM).
- Services Growth (MoM): Supported by trade (1.6 percent MoM) and loans to Non-Banking Financial Companies (NBFCs) (0.8 percent MoM).
On a YoY basis, growth momentum was notably led by services (23 percent), industry (20 percent), retail (20 percent), and agriculture (17 percent).
Leading and Muted Sub-Segments (YoY):
- Leading Sub-segments: Gold loans surged 88 percent YoY, loans to NBFCs increased 36 percent YoY, and MSME loans grew 25 percent YoY.
- Muted Growth: Housing loans saw 11.3 percent growth, while unsecured retail growth was 12.7 percent, indicating slower expansion in these areas compared to other segments.