Macquarie upgrades Kotak Mahindra Bank, SBI Life stock ratings, cuts Bajaj Finance share price target

Macquarie has upgraded ratings on the stocks of Kotak Mahindra Bank and SBI Life to 'outperform'. The brokerage has also raised the share price target for Kotak Mahindra Bank to Rs 2,025, and that for SBI Life to Rs 1,750.

Further, Macquarie has cut Bajaj Finance stock rating to 'underperform' from 'neutral', and its share price target to Rs 6,600. It has also cut SBI stock rating to 'underperform'.

The brokerage said that private sector banks are at attractive valuations, and are expected to report 16-18 percent RoE (Return on Equity) over the next couple of years. It said it would avoid PSU banks, insurance firms, and fintech stocks, due to regulatory issues.

Macquarie's top picks among banking stocks are Axis Bank and IndusInd Bank. The brokerage's top picks NBFCs (non-banking finance companies) are Shriram Housing Finance and LIC Housing Finance.

Banking sector index Bank Nifty has recently shown buoyancy, hitting a new all-time high this week, just shy of 52,000 points. On June 19, the Bank Nifty jumped up to 3 percent, reaching a record 51,957, driven by private lenders such as Axis Bank, HDFC Bank, ICICI Bank, and IndusInd Bank, among others. Shares of Axis Bank, HDFC Bank, ICICI Bank, IndusInd Bank, Kotak Mahindra Bank, IDFC First Bank, SBI, and Bandhan Bank increased by 1-3 percent.

In a recent note, Bernstein noted India's banking sector's strong credit growth, benign asset quality, and healthy margins. Bernstein analysts said that NBFCs and HFCs (housing finance companies) could compound gains just like large private lenders.