Market watchers bullish on banking stocks, eye on Axis Bank valuations

HDFC Bank has particularly stood out with its impressive performance, positioning itself as a leader in the sector. ICICI Bank also garnered recognition as the second pick after HDFC Bank.

“Amongst the large banks, my pecking order is HDFC Bank followed by ICICI Bank. My top beta pick is Axis Bank and that is mainly on account of it being perhaps the best liability beta play out there,” he said.

However, Axis Bank's valuations are on the cheaper side, which could be an attractive option for investors looking for a bargain. It is important to note that valuations are only one aspect of a company's worth and should be considered alongside other factors before making any investment decisions.

Despite the impressive performance of some banks, Krishna Kumar Karwa, from Emkay Global, noted that earnings upgrades across the board have been few and far between. This suggests that while the overall banking sector has recovered from lows in the last 30-45 days, there may still be some room for improvement in terms of earnings.

“Numbers have been very good for banks and banks have recovered from their lows in the last 30-45 days but in terms of valuation multiples will we see an expansion of further valuation multiples or are most of the banks now getting into a territory where they could be earnings compounders? So that is the key question that one should be focusing on. The results have been broadly - I have not seen too many earnings upgrades across the board” he said.

Overall, the banking sector in India has shown resilience. With strong performers like HDFC Bank and ICICI Bank, as well as potential value opportunities like Axis Bank, there are options available for investors looking to tap into the sector's growth potential.