NEW DELHI, January 27, 2026 — Investors are closely watching the banking and financial services sector as earnings reports reveal a mixed bag of short-term hurdles and long-term potential. A recent discussion with Gaurang Shah of Geojit Financial Services highlighted key trends in bank results, asset quality, and where investors might find value in the current market.
IndusInd Bank’s Ambitious Goals Under Scrutiny
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The debate centers on whether IndusInd Bank can realistically achieve a 1% return on assets by fiscal year 2027.
Shah began by disclosing that all recommendations stem from his firm’s fundamental research team and represent long-term views. “Our company, Geojit, or myself do not have any kind of investment, any kind of financial interest, no conflict of interest, but we give advice to our clients on similar lines. They might have their investment interest,” he stated.
Commenting on recent performance, Shah noted that among Axis Bank, Kotak Mahindra Bank, and IndusInd Bank, the latter experienced a weaker quarter, primarily due to higher gross and net non-performing assets. However, he acknowledged the bank’s recovery efforts, suggesting a potential improvement in the fourth quarter, though stopping short of calling it a full turnaround. He did express optimism about the outlook for the next financial year.
“As a disclosure, we have positive coverage on all three banks — IndusInd, Axis, as well as Kotak,” Shah added, predicting continued strong loan book growth driven by rising credit demand and cumulative interest rate cuts of around 1.25% over the past year. This environment, he believes, should benefit the entire BFSI (Banking, Financial Services, and Insurance) universe, including public sector banks, private lenders, and well-capitalized NBFCs (Non-Banking Financial Companies).
Net Interest Margin Pressures and Long-Term Outlook
The conversation then shifted to net interest margins, with a note that both Axis Bank and Kotak Mahindra Bank anticipate potential pressure in the fourth quarter following the December repo rate cut.
Shah acknowledged the challenge of maintaining net interest margins in the short term, stating, “A lot depends upon the cost of borrowing and cost of lending.” However, he cautioned against overreacting to quarterly fluctuations. “One-off quarters should not be a reason to deviate from your long-term investment objectives,” he advised, emphasizing that the overall trajectory for the BFSI sector remains positive despite temporary headwinds.
Looking ahead to the financial year beginning April 1, 2026, Shah anticipates a positive outlook for the sector as a whole.
Where Should Investors Put Their Money?
When asked about buying banking stocks after the earnings announcements, Shah said Geojit remains constructive on several private sector banks, specifically naming HDFC Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank, Federal Bank, IDFC First Bank, and City Union Bank.
Among public sector banks, he highlighted State Bank of India, Bank of Baroda, Bank of India, Canara Bank, Indian Bank, and Union Bank of India, noting their strong recent performance. He also pointed to robust performance within the NBFC space, citing Shriram Finance, L&T Finance, Mahindra Finance, and Bajaj Finance.
In the small finance bank segment, Geojit remains positive on AU Small Finance Bank and CreditAccess Grameen.
In conclusion, Shah believes investors with equity exposure should consider allocating a dedicated portion of their portfolio to the BFSI segment, given its improving fundamentals and long-term growth prospects.
