NewsStocksChola Securities backs PSU banks amid private sector struggles, cautious on midcap cementChola Securities backs PSU banks amid private sector struggles, cautious on midcap cement
Chola Securities has shifted its banking sector allocation towards PSU banks, citing their superior 15-19% advances growth compared to private sector peers. The brokerage found ICICI Bank's Q3FY26 results muted despite 11.5% advances growth, with weak other income growth of 3% versus HDFC Bank's 30%. In cement, while constructive on the sector citing volume growth and price hikes, the firm prefers large-cap Ambuja Cements over expensive midcap names, expecting 15-20% returns over 3-4 months.
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Chola Securities has shifted its banking sector preference towards public sector undertaking (PSU) banks, citing superior growth momentum compared to struggling private sector lenders. The brokerage's Head of Research, Dharmesh Kant, believes PSU banks are now delivering stronger performance metrics while private banks continue to stabilise after a weak credit cycle.
PSU Banks Lead Growth Momentum
The research house's allocation strategy now favours PSU banks, with several institutions reporting impressive advances growth figures. According to Kant, multiple PSU banks are achieving 15-19% advances growth, significantly outpacing their private sector counterparts. This performance differential, combined with improving asset quality metrics, has positioned public sector banks as the preferred investment choice in the near term.
| Bank Performance Metrics: | Details |
|---|---|
| PSU Banks Advances Growth: | 15-19% |
| ICICI Bank Q3FY26 Advances Growth: | 11.5% |
| HDFC Bank Other Income Growth: | 30% |
| ICICI Bank Other Income Growth: | 3% |
ICICI Bank Q3FY26 Results Disappoint
ICICI Bank's October-December 2025 quarter results failed to generate investor enthusiasm, according to Chola Securities' assessment. While the bank managed 11.5% advances growth, which exceeded many private sector peers, the overall performance was dampened by additional provisioning requirements and weak growth in other income streams. The stark contrast with HDFC Bank's 30% other income growth versus ICICI Bank's modest 3% made the latter's numbers appear less attractive to investors.
Kant expects ICICI Bank's stock to remain subdued until greater clarity emerges from the January-March 2026 quarter results, particularly as the market awaits the full impact of December's rate cut to materialise.
Bank of India Achieves Target
Among PSU banks, Bank of India has already delivered on expectations, with its stock price surging from approximately ₹110 to the ₹155 target level within just a few trading sessions. The research team is now awaiting detailed post-result commentary before revising price targets for the stock.
Cement Sector Outlook Mixed
Chola Securities has turned constructive on the cement sector, driven by strong volume growth trends and recent industry-wide price increases. However, the brokerage maintains a selective approach within the sector.
| Cement Sector Recommendations: | Strategy |
|---|---|
| JK Cement: | Encouraging numbers but avoid chasing |
| Midcap/Smallcap Names: | Cautious due to expensive valuations |
| Ambuja Cements: | Preferred large-cap pick |
| Expected Returns: | 15-20% over 3-4 months |
While JK Cement's financial numbers and capacity expansion plans appear encouraging, Kant advises investors against chasing expensive mid and small-cap cement stocks. The preference remains firmly with large-cap sector leaders, particularly Ambuja Cements, where valuations appear more reasonable and the near-term trading outlook seems favourable.
Market Expectations
For the cement sector, Kant anticipates the current quarter should perform well, with potential returns of 15-20% over the next three to four months for well-positioned stocks. This optimistic outlook is underpinned by the combination of volume growth momentum and successful price hike implementations across the industry.
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