It’s a long-overdue catch-up, in our view.
Despite strong balance sheets, improving asset quality, and consistent performance, private sector banks – especially the larger ones – had been lagging in stock price performance over the past 2–3 years.
Fundamentals stayed solid, but the market just didn’t reward them.
That’s starting to change.
The RBI’s recent push toward supporting growth – through signals of potential rate cuts and a focus on liquidity – has been a key trigger.
It’s rekindled interest in a sector that had the fundamentals in place but lacked sentiment support.
However, one area to watch closely is deposit growth. It’s not keeping pace with lending, and any further fall in interest rates could make banks less attractive for savers and potentially diverting liquidity elsewhere.
Still, given the combination of stable results, reasonable valuations, and improving FII flows, we believe private banks are well-positioned for a stronger run ahead.
