Bank Stocks: Is 10% fall in Nifty Bank a buying opportunity? Citi, Jefferies and CLSA weigh in

Banking stocks have come under pressure in recent weeks, with the banking index falling sharply amid global market volatility and rising geopolitical tensions.

The Nifty Bank has declined more than 10 per cent over the past month, reflecting broad-based weakness in both private and public sector banking stocks.

The index was trading at 53,928.65, down 1,172.30 points or 2.13 per cent during the day on March 13. Over the past month, the index has fallen 6,241.50 points or 10.37 per cent. On a year-to-date basis, it is down 5,766.40 points or 9.66 per cent.

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PSU and private bank indices decline

Banking sub-indices have also witnessed selling pressure.

The Nifty PSU Bank was trading at 8,592.70, down 253.35 points or 2.86 per cent. The index has declined 6.44 per cent in one week and 6.26 per cent over the past month, though it remains marginally positive with a 0.25 per cent gain so far this year.

Meanwhile, the Nifty Private Bank stood at 25,513.70, down 542.95 points or 2.08 per cent. The index has fallen 6.96 per cent in one week, 11.09 per cent in one month, and 11.39 per cent year to date.

Private bank stocks also correct

Shares of major private sector lenders have also corrected.

ICICI Bank was trading at Rs 1,254.70, down 0.93 per cent during the day. The stock has declined 4.48 per cent over the past week, 11.32 per cent in the last month, and 6.24 per cent so far this year.

HDFC Bank was trading at Rs 817.15, down 1.87 per cent. The stock has fallen 4.64 per cent in one week, 9.59 per cent in one month, and 17.55 per cent year to date.

Similarly, Kotak Mahindra Bank was trading at Rs 365.60, down 2.58 per cent. The stock has declined 8.52 per cent in one week, 13.05 per cent in one month, and 17.54 per cent so far this year.

Shares of Axis Bank were trading at Rs 1,201.80, down 2.65 per cent. The stock has slipped 8.70 per cent over the past week, 9.83 per cent in one month, and 5.74 per cent year to date.

Experts see attractive valuations after correction

Despite the recent correction, market experts and brokerages say valuations of quality banking stocks have become attractive from a long-term perspective.

Gurmeet Chadha, Managing Partner and CIO at Complete Circle Wealth, said he remains positive on financial stocks, particularly quality banks and non-bank lenders.

“Credit growth in India is still strong at around 13 per cent and may rise further due to higher working capital requirements for companies amid supply chain disruptions caused by geopolitical conflicts,” Chadha said.

He added that valuations of leading private sector banks have become reasonable after the recent correction.

“Top private banks are trading around 12–14 times earnings and close to two times book value. That makes them attractive from a long-term perspective,” he said.

CLSA positive on HDFC Bank

CLSA also remains positive on large private sector banks and has maintained its positive stance on HDFC Bank and ICICI Bank.

The brokerage maintained an “Accumulate” rating on HDFC Bank with a target price of Rs 1,200. According to CLSA, investor concerns around HDFC Bank’s loan-to-deposit ratio are likely to ease.

The brokerage said consensus may stop “over-analysing” the bank’s LDR as even the Reserve Bank of India is not focusing heavily on this metric anymore.

CLSA expects HDFC Bank’s core pre-provision operating profit to grow at an 18 per cent CAGR between FY26 and FY28, compared with 12 per cent between FY24 and FY26, which could support a re-rating of the stock.

The brokerage said the stock is currently trading at about 1.8 times price-to-book value and 13 times one-year forward earnings.

CLSA sees upside in ICICI Bank

CLSA also maintained an “Accumulate” rating on ICICI Bank with a target price of Rs 1,700. The brokerage believes a recovery in retail loan growth could support overall credit growth for the bank. Retail loan growth at ICICI Bank is currently around 7 per cent year-on-year.

CLSA said the bank’s strong net slippage ratio over the past two quarters is being overlooked by investors and could lead to lower credit costs than estimates in FY27.

The brokerage said ICICI Bank is currently trading at about two times price-to-book value and 14 times one-year forward earnings, leaving room for potential re-rating.

CLSA said both HDFC Bank and ICICI Bank could deliver more than 25 per cent returns over the next 12 months, noting that the stocks have declined 5–15 per cent year to date despite improving outlooks.

Jefferies on banks’ aviation exposure

Brokerage Jefferies said the impact of geopolitical tensions in West Asia on Indian financial companies could vary across segments.

The brokerage noted that Indian banks have a limited exposure to the aviation sector, which may face pressure due to rising oil prices and operational disruptions.

According to Jefferies, banks have lent around Rs 50,000 crore to airlines, which accounts for about 0.2 per cent of their loan mix. A large part of this exposure is to Air India, followed by IndiGo, SpiceJet, and Akasa Air.

The brokerage said airline debt is largely driven by aircraft lease liabilities. With oil prices rising, airlines may seek government support or higher working capital loans, though restructuring risks appear limited.

Jefferies added that Indian Bank, Bank of Baroda, State Bank of India, and Yes Bank have relatively higher exposure to the aviation sector.

Citi flags macro risks but sees sector strength

Citi said tensions in West Asia could add macroeconomic risks for Indian banks. However, the brokerage said the banking sector is entering this phase from a strong position, with decade-low gross non-performing assets and strong capital buffers measured through CET-1 ratios.

Citi said risks could arise from higher crude oil prices, trade disruptions, foreign exchange volatility, liquidity tightening and a wider current account deficit if the conflict persists.

The brokerage warned that a prolonged conflict may pressure asset quality, liquidity conditions, market risk and credit growth. Citi said its preferred lenders remain HDFC Bank, ICICI Bank and RBL Bank.

Overall, brokerages say that while global uncertainties may keep banking stocks volatile in the near term, valuations of several large lenders are now near historical lows which gives fresh buying opportunity for investors.