Midcap private banks poised to outperform PSU banks, says Morgan Stanley

Global brokerage Morgan Stanley believes that the large private banks are currently in a favorable position but it is the midcap private banks that are expected to outshine the PSU banks after a significant rally in the PSU sector last year. The renowned financial institution has identified its top picks, which include ICICI Bank and Axis Bank. In addition, they have marginally increased the target price for IndusInd Bank.

The global brokerage's analysis indicates a favorable outlook for the private banking sector, and specifically the midcap private banks. These banks are predicted to surpass the performance of PSU banks, benefiting from the momentum gained by the PSU sector in the previous year. By focusing on midcap private banks, investors may be able to capitalise on the expected growth and outperformance.

Among the top bets suggested by Morgan Stanley, ICICI Bank and Axis Bank stand out. These institutions have been identified as strong performers within the midcap private banking space.

Moreover, Morgan Stanley has raised the target price for IndusInd Bank, indicating their confidence in its future prospects. The revised target price now stands at Rs 1,725 per share, compared to the previous target of Rs 1,550.

While the midcap private banks show great promise, it is worth noting that Morgan Stanley has made some adjustments to its outlook for State Bank of India (SBI). The firm has marginally lowered SBI's rating from overweight to equalweight, with a target price of 715.

Despite this adjustment, Morgan Stanley maintains a positive stance on private banks overall and believes they remain in a favorable position.

In addition to the target price revision for IndusInd Bank, Morgan Stanley has also increased the target prices for two other private bank stocks. RBL Bank's target price has been raised to Rs 180 from Rs 130, indicating a positive outlook for the stock.

AU Small Finance Bank has also seen its target price raised to Rs 965. These revisions further reinforce Morgan Stanley's confidence in the midcap private banking sector.