Banking stocks gained 65% in 2014 but more steam left, says report

Click on graphic

After a stellar 65 per cent rally last year, there might still be a lot of steam left in banking stocks, believes CLSA. In a note, the broking house says these stocks will continue to rally on economic growth, easing rates, improving asset quality and favourable rules. CLSA analysts are of the view that digitisation and pruning of debt will be the two key themes that will influence returns. The brokerage expects Indian banks to post a 20 per cent rise in earnings over FY15-FY17, compared with a 3 per cent drop in FY14. Among larger lenders, ICICI Bank and State Bank of India are CLSA's top bets, while IndusInd Bank is the top bet in the mid-cap space. CLSA has raised the rating on Bank of Baroda and Bank of India to 'buy' from 'outperform'. The brokerage says non-banking finance companies (NBFCs), too, will benefit from easing in borrowing rates. HDFC and Indiabulls Housing are its top picks among NBFCs.