Santanu Chakrabarti, India Analyst – BFSI at BNP Paribas, remains constructive on large private banks, positioning HDFC Bank as his top pick and ICICI Bank as a close second. However, he maintains a more cautious stance on PSU banks despite their recent rally.

HDFC Bank: Top Investment Choice

HDFC Bank remains Chakrabarti's number one idea in the banking space, supported by several key factors:

Chakrabarti noted that while HDFC Bank is still dealing with a less-than-optimal liability structure following the merger, this situation is gradually improving. As high-cost liabilities roll off over time, margins should benefit from a steady and benign tailwind. Even if margins soften in the near term across the sector, he believes the bank's longer-term re-rating story remains firmly in place.

The analyst expects the market to focus more on margins and loan growth trends rather than short-term movements in credit costs, which supports his positive outlook on the bank.

ICICI Bank: Strong Second Choice

ICICI Bank continues to be a preferred name in Chakrabarti's coverage, backed by its strong track record over the last four to five years and continuity in leadership. He believes this stability should support the bank's performance over the next 12 months.

However, he identified a near-term risk that could create opportunities:

• Slight weakness in retail loan growth over recent quarters
• Reduced savings account accretion in the last couple of quarters
• Very high market expectations that could lead to stock pressure

Chakrabarti views any potential weakness as a buying opportunity for long-term investors, given the bank's fundamentally strong position.

Cautious Stance on PSU Banks

Despite acknowledging the strong recent performance of PSU banks, Chakrabarti maintains a neutral view on State Bank of India, citing concerns around sustainability of returns.

He explained that PSU banks rely heavily on high leverage and unusually low credit costs to deliver mid-teen returns on equity. Such low credit costs are unlikely to be sustainable, and even a normalization to moderate levels could sharply hurt earnings growth and return ratios, limiting further upside despite healthy balance sheets and market share gains.

Investment Strategy Focus

Chakrabarti's analysis suggests a clear preference for large private banks over PSU banks, emphasizing the importance of sustainable business models and long-term structural improvements. His approach focuses on banks with strong fundamentals, leadership stability, and clear paths to margin expansion rather than those dependent on potentially unsustainable cost advantages.

Leading brokerage firms are maintaining positive outlooks on select stocks as markets increasingly focus on company-specific opportunities rather than broad-based movements. Investment houses are spotlighting companies with solid fundamentals and visible growth prospects amid the current market environment.

Brokerage Recommendations Overview

Citi has retained its 'Buy' rating on HDFC Bank and Reliance Industries following their Q3 results. This recommendation signals the brokerage's confidence in these major market players despite the broader market conditions.

Sectoral Growth Prospects

Motilal Oswal's bullish stance on JSW Infrastructure reflects growing confidence in India's expanding ports and logistics sector. The brokerage's positive view is supported by several key factors:

• Ongoing capacity additions across the infrastructure network
• Rising operational scale in the ports segment
• India's expanding logistics and infrastructure development

Market Focus Shift

The current market environment shows a clear shift toward stock-specific opportunities rather than broad-based market movements. Brokerages are increasingly identifying and recommending companies that demonstrate:

• Strong fundamental performance
• Clear visibility in growth prospects
• Solid operational metrics
• Sector-specific advantages

This selective approach by major brokerages indicates a more nuanced investment strategy, focusing on individual company merits rather than broader market trends.