RBL Bank, ICICI, KVB, Shriram Finance, CREDAG, Paytm among Nuvama's top BFSI picks

Nuvama in its latest note said June quarter is likely to be mixed for the BFSI space, with strong growth but soft margins and asset-quality niggles in select segments such as vehicle finance, secured business loans, gold and agri. It said margins, however, should bottom out in Q1 and improve thereafter as better systemic liquidity from FCNR flows starts to trickle in.

ICICI Bank Ltd, RBL Bank Ltd, Karur Vysya Bank Ltd (KVB), Ujjivan Small Finance Bank, AB Capital, L&T Finance, Shriram Finance, CreditAccess Grameen Ltd (CREDAG) and One 97 Communications Ltd (Paytm) are its top BFSL picks. 

The brokerage said the benefit of ECLGS, mainly for banks, and the receding effects of the West Asia conflict should gradually reduce asset-quality noise, leading to an earnings uptick for banks as well as NBFCs in the second half. It said management clarity should emerge soon in HDFC Bank Ltd and Kotak Mahindra Bank Ltd. Nuvama said it remains constructive on private sector banks, while easing funding-cost pressure should support NBFCs. 

Here are target prices for banking and financial stocks under Nuvama's coverage:-

Nuvama said banking system credit growth, or non-food credit growth, stood at 17.4 per cent year-on-year as on June 15, 2026, indicating sustained momentum. It said this is likely to be led mainly by corporate credit, including loans to OMCs, AAA corporates and NBFCs, as well as agri and MSME lending, partly driven by ECLGS 5.0. Deposit growth, however, continues to lag at 12 per cent, with banks remaining reliant on wholesale deposits to fund growth. This, along with interest reversal on agri NPAs, is expected to weigh on core margins by 5-10 basis points. Nuvama said its NBFC coverage universe is also likely to post strong growth of 21.5 per cent year-on-year, though higher sequential funding costs should keep margins in check.

Among banks that have posted business updates, Nuvama said HDFC Bank, Axis Bank, YES bank, Ujjivan SFB and Canara Bank surprised positively, while Kotak Bank was a slight disappointment. 

"On margins, it expects KMB, AU and KVB may report a sharp correction, partly because of a technical pull-down, while most other banks are likely to post margin contraction of around 2-10 basis points. Among NBFCs, CREDAG and LTF posted strong growth, while MMFSL was a slight disappointment. On the margin front, Nuvama expects some softness for BAF, Tata Cap, MMFSL and Muthoot, while SHFL is likely to post a margin uptick," it said.

On asset quality, Nuvama said stress in unsecured segments such as MFI, credit cards and PL should continue to normalise in Q1, though job losses in the IT sector and emerging stress in MSME, SBL, CV/CE and gold loans warrant monitoring. It said easing crude oil prices and the normalisation of global supply chains should help prevent these areas of weakness from turning into a broader asset-quality downcycle. It also said ECLGS 5.0 should support MSMEs and help arrest stress in this segment for banks, mainly PSBs. However, agri, especially KCC, stress is expected to remain seasonally high in Q1, while the real impact of El Niño is likely to be seen in Q3, warranting some caution mainly for PSBs.

Overall, Nuvama said sector-wide credit costs have largely bottomed out and are likely to edge up as banks build additional provisioning buffers ahead of the transition to the Expected Credit Loss framework, although the increase should remain manageable. For NBFCs, it said credit costs could remain marginally elevated in H1FY27 for vehicle financiers because of seasonal factors and the lingering impact of the West Asia conflict on freight activity and borrower cash flows. The brokerage’s view for Q1FY27 remains that growth should stay strong, margins should remain soft in the quarter, and asset-quality pressure should stay limited to select segments.