Axis Securities Identifies Top Banking, NBFC Stocks to Buy Following Q4 2026 Earnings

Banking Stocks to Buy: Analysts Turn Optimistic on Select Lenders and NBFCs

India's banking and financial sector emerged from the Q4FY26 earnings season with improving asset quality, stable credit growth, and moderating credit costs, prompting brokerages to turn increasingly optimistic on select lenders and NBFCs for the medium term. According to a report by Axis Securities, the overall outlook for the BFSI space remains constructive despite external risks linked to geopolitical tensions and elevated global uncertainty.

The report highlights that banks witnessed recovery in corporate demand along with steady retail demand, while stress in unsecured portfolios continued to ease across segments and geographies. Credit costs declined meaningfully during the quarter, aiding earnings growth across the banking universe. Axis Securities believes that most banks are entering a more stable asset quality cycle after stress in unsecured retail segments moderated sharply during recent quarters.

Improving Asset Quality Trends

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The sector's improving asset quality trends remain one of the biggest positives emerging from the March quarter earnings season. Mid-sized private banks and small finance banks may continue to outperform larger peers in terms of loan growth and margin improvement over the medium term, while PSU banks are expected to benefit from improving operating efficiency and lower stress formation.

Top Conviction Ideas

Axis Securities has identified several "top conviction ideas" across private banks, PSU banks, small finance banks, and NBFCs following the Q4FY26 earnings season. The brokerage has assigned a "Buy" rating and a target price of ₹1,700 to ICICI Bank, citing its improving credit growth momentum, stable margins, and benign credit cost outlook as key positives.

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Axis Securities expects ICICI Bank to deliver nearly 16% CAGR credit growth over FY26-FY28 while maintaining stable asset quality trends despite geopolitical uncertainties. The brokerage also believes the bank's unsecured portfolio stress has eased significantly.

Other Top Picks

Kotak Mahindra Bank has also received a "Buy" recommendation from Axis Securities with a target price of ₹500. The brokerage believes the worst of the unsecured loan stress cycle is now behind the bank. Axis Securities also highlighted Kotak Mahindra Bank's ongoing digitisation and automation efforts, which are expected to improve operational efficiency and gradually lower cost ratios over FY27 and FY28.

State Bank of India remains Axis Securities' preferred pick among PSU lenders with a "Buy" rating and a target price of ₹1,285. The brokerage highlighted SBI's broad-based loan growth across retail, agriculture, and corporate segments, along with growing exposure to emerging sectors such as renewable energy, transmission, and semiconductor ecosystems.

Federal Bank was another preferred mid-sized banking idea with Axis Securities assigning a "Buy" rating and a target price of ₹340. The brokerage highlighted the lender's improving CASA mix, calibrated deposit repricing strategy, and healthy asset quality profile as key strengths.

Ujjivan Small Finance Bank also featured among Axis Securities' top conviction ideas with a target price of ₹78. The brokerage said the lender's focus on diversifying its loan book and increasing the share of secured loans could support stronger and more stable growth over the medium term.

Among NBFCs, Bajaj Finance remained one of Axis Securities' top picks with a target price of ₹1,160. The brokerage expects improving asset quality, lower credit costs, and strong customer additions to support earnings growth going forward.