Kotak Mahindra Bank: Should you buy, hold or sell this stock in 2026?
MOFSL said Kotak Mahindra Bank remained open to merger and acquisition opportunities on a selective basis, though capital discipline and return thresholds remained key.
- Jan 1, 2026,
- Updated Jan 1, 2026 8:12 AM IST
Motilal Oswal Financial Services (MOFSL) on Thursday retained its 'Buy' rating on Kotak Mahindra Bank with a target price of Rs 2,500, citing disciplined balance-sheet growth, improving granularity, and sustained return ratios despite near-term margin and credit-cost volatility. MOFSL said the bank remained well positioned to deliver RoA of 2 per cent and RoE of 12.7 per cent by FY27E, supported by calibrated credit growth, easing unsecured stress, and operating leverage from digital investments.
MOFSL said Kotak Mahindra Bank continued to align balance-sheet expansion with a disciplined growth framework of around 1.5-2 times nominal GDP, while steadily improving business mix through retail- and SME-led growth. Net interest margins were expected to remain range-bound in the near term, with Q3 FY26 margins likely to stay flat due to temporary interbank yield distortions and deployment of short-term liquidity at lower yields. The brokerage said the impact of the recent 25 basis point rate cut was expected to flow through mainly in Q4 FY26.
MOFSL said funding costs were expected to ease gradually as deposit repricing and migration toward ActivMoney sweep deposits progressed, though benefits from term-deposit repricing were likely to accrue with a lag. Despite near-term noise, absolute net interest income continued to grow, reinforcing confidence in earnings stability. Credit costs, which peaked in Q1 FY26 due to unsecured stress, were expected to trend down gradually, with management guiding for a comfortable range of around 55–60 basis points over the medium term. Visible improvement was expected from Q1 FY27 onward, as stress in personal loans and microfinance had largely eased.
The brokerage said the bank’s leadership remained focused on execution discipline, digital investments, and cost control, supporting its ability to sustain RoA of around 2 per cent plus through the cycle. Kotak Mahindra Bank continued to add 150-200 branches annually without a proportional increase in headcount, highlighting operating leverage from digitisation.
MOFSL noted that loan growth remained calibrated, with advances rising 15.8 per cent year-on-year to Rs 4.63 lakh crore in Q2 FY26. Management had reiterated that secured lending would grow faster than unsecured, although absolute unsecured balances were expected to expand as risk conditions improved. Retail assets such as housing loans and loans against property continued to perform well, while wholesale growth remained selective and margin-led, with a preference for flow-based businesses. Credit cards remained in a rebuilding phase, with management prioritising portfolio quality and profitability over growth.
Over FY26-28, MOFSL expected advances growth to be led by retail mortgages, loans against property, and SME lending, supported by urban housing demand, rising self-employed credit penetration, and a largely secured SME book. Stress in retail commercial vehicles and construction equipment was expected to persist in the near term, prompting continued caution. Agri and tractor financing remained strong, supported by a good monsoon and improving rural cash flows. The brokerage said the bank was also stepping up focus on gold loans, which remained a small but strategically attractive portfolio. Personal loan growth had picked up selectively, while credit card growth was expected to resume gradually as portfolio seasoning improved.
MOFSL said Kotak Mahindra Bank’s liability franchise remained a structural strength. The moderation in reported savings account balances partly reflected migration into sweep deposits rather than underlying weakness. Savings account growth had improved over the last two quarters, supported by better customer acquisition and granularity. CASA remained healthy at around 42 per cent, while sweep products helped cushion funding-cost pressures. Although benefits from savings-account repricing had largely flowed through, term-deposit repricing was expected to take a few more quarters, particularly after recent system-wide rate cuts. Overall funding costs were expected to trend lower over the medium term.
Asset quality trends remained stable, with slippages and early delinquency indicators under control. Stress in microfinance and personal loans had largely normalised, while credit card losses remained within expectations. Retail commercial vehicle stress persisted but was manageable due to the smaller book size. The SME portfolio remained largely secured, limiting downside risk. With a provision coverage ratio of around 77 per cent, MOFSL said credit losses were well cushioned and credit costs were expected to decline steadily after FY26. The brokerage estimated GNPA and NNPA at 1.35 per cent and 0.29 per cent in FY26E, improving to 1.31 per cent and 0.27 per cent in FY27E.
MOFSL said Kotak Mahindra Bank remained open to merger and acquisition opportunities on a selective basis, though capital discipline and return thresholds remained key. The bank had no plans to unlock value from subsidiaries, consistent with its long-term ownership philosophy. Strong capital buffers, with CET-1 of around 21 per cent plus, provided ample flexibility for growth while maintaining balance-sheet resilience.
On valuation, MOFSL said the stock was valued at 2.5 times FY27E adjusted book value, including a sum-of-the-parts value of Rs 775 for subsidiaries. The brokerage reiterated that disciplined execution, a strong liability franchise, and capital strength underpinned confidence in sustainable returns, and retained its BUY rating with a target price of Rs 2,500.
Motilal Oswal Financial Services (MOFSL) on Thursday retained its 'Buy' rating on Kotak Mahindra Bank with a target price of Rs 2,500, citing disciplined balance-sheet growth, improving granularity, and sustained return ratios despite near-term margin and credit-cost volatility. MOFSL said the bank remained well positioned to deliver RoA of 2 per cent and RoE of 12.7 per cent by FY27E, supported by calibrated credit growth, easing unsecured stress, and operating leverage from digital investments.
MOFSL said Kotak Mahindra Bank continued to align balance-sheet expansion with a disciplined growth framework of around 1.5-2 times nominal GDP, while steadily improving business mix through retail- and SME-led growth. Net interest margins were expected to remain range-bound in the near term, with Q3 FY26 margins likely to stay flat due to temporary interbank yield distortions and deployment of short-term liquidity at lower yields. The brokerage said the impact of the recent 25 basis point rate cut was expected to flow through mainly in Q4 FY26.
MOFSL said funding costs were expected to ease gradually as deposit repricing and migration toward ActivMoney sweep deposits progressed, though benefits from term-deposit repricing were likely to accrue with a lag. Despite near-term noise, absolute net interest income continued to grow, reinforcing confidence in earnings stability. Credit costs, which peaked in Q1 FY26 due to unsecured stress, were expected to trend down gradually, with management guiding for a comfortable range of around 55–60 basis points over the medium term. Visible improvement was expected from Q1 FY27 onward, as stress in personal loans and microfinance had largely eased.
The brokerage said the bank’s leadership remained focused on execution discipline, digital investments, and cost control, supporting its ability to sustain RoA of around 2 per cent plus through the cycle. Kotak Mahindra Bank continued to add 150-200 branches annually without a proportional increase in headcount, highlighting operating leverage from digitisation.
MOFSL noted that loan growth remained calibrated, with advances rising 15.8 per cent year-on-year to Rs 4.63 lakh crore in Q2 FY26. Management had reiterated that secured lending would grow faster than unsecured, although absolute unsecured balances were expected to expand as risk conditions improved. Retail assets such as housing loans and loans against property continued to perform well, while wholesale growth remained selective and margin-led, with a preference for flow-based businesses. Credit cards remained in a rebuilding phase, with management prioritising portfolio quality and profitability over growth.
Over FY26-28, MOFSL expected advances growth to be led by retail mortgages, loans against property, and SME lending, supported by urban housing demand, rising self-employed credit penetration, and a largely secured SME book. Stress in retail commercial vehicles and construction equipment was expected to persist in the near term, prompting continued caution. Agri and tractor financing remained strong, supported by a good monsoon and improving rural cash flows. The brokerage said the bank was also stepping up focus on gold loans, which remained a small but strategically attractive portfolio. Personal loan growth had picked up selectively, while credit card growth was expected to resume gradually as portfolio seasoning improved.
MOFSL said Kotak Mahindra Bank’s liability franchise remained a structural strength. The moderation in reported savings account balances partly reflected migration into sweep deposits rather than underlying weakness. Savings account growth had improved over the last two quarters, supported by better customer acquisition and granularity. CASA remained healthy at around 42 per cent, while sweep products helped cushion funding-cost pressures. Although benefits from savings-account repricing had largely flowed through, term-deposit repricing was expected to take a few more quarters, particularly after recent system-wide rate cuts. Overall funding costs were expected to trend lower over the medium term.
Asset quality trends remained stable, with slippages and early delinquency indicators under control. Stress in microfinance and personal loans had largely normalised, while credit card losses remained within expectations. Retail commercial vehicle stress persisted but was manageable due to the smaller book size. The SME portfolio remained largely secured, limiting downside risk. With a provision coverage ratio of around 77 per cent, MOFSL said credit losses were well cushioned and credit costs were expected to decline steadily after FY26. The brokerage estimated GNPA and NNPA at 1.35 per cent and 0.29 per cent in FY26E, improving to 1.31 per cent and 0.27 per cent in FY27E.
MOFSL said Kotak Mahindra Bank remained open to merger and acquisition opportunities on a selective basis, though capital discipline and return thresholds remained key. The bank had no plans to unlock value from subsidiaries, consistent with its long-term ownership philosophy. Strong capital buffers, with CET-1 of around 21 per cent plus, provided ample flexibility for growth while maintaining balance-sheet resilience.
On valuation, MOFSL said the stock was valued at 2.5 times FY27E adjusted book value, including a sum-of-the-parts value of Rs 775 for subsidiaries. The brokerage reiterated that disciplined execution, a strong liability franchise, and capital strength underpinned confidence in sustainable returns, and retained its BUY rating with a target price of Rs 2,500.