Indian Bank may benefit from banking revival; ICICIDirect's Jai Thakkar sees upside

Indian Bank could emerge as a key beneficiary of a broader revival in banking stocks, with Jai Thakkar, Head of Derivatives and Quant Research & Vice President at ICICIDirect advising investors to stay invested in the PSU lender and watch for a positional upside towards Rs 920, provided the stock holds above Rs 840.

The call comes at a time when sentiment around financials is turning constructive again, with Thakkar arguing that the sector’s recent consolidation may be nearing an end. His broader thesis is that banking and financial stocks are setting up for renewed outperformance after a pause.

Banking comeback back on the radar
Thakkar said his stance on the banking and financial space remains firmly positive, even as leadership within the segment has so far been more visible in non-banking lenders. “Overall banking financial sector remained a positive space for me,” he said, while pointing to strong trends in NBFC names such as Shriram Finance, Muthoot Finance, Manappuram, Cholamandalam Finance and Bajaj Finance.

That strength in NBFCs, he suggested, is now likely to spill over into banks, especially as macro conditions begin to look more supportive for the sector.

Why the macro setup matters
According to Thakkar, the Reserve Bank of India maintaining status quo is a supportive signal for lenders, as it helps preserve stability in the rate environment. He also flagged the global backdrop, noting that while the US Federal Reserve has remained hawkish, any de-escalation in that stance would reduce the probability of further rate hikes and improve the outlook for banking stocks.

The implication for investors is clear: if interest-rate pressures ease and domestic policy remains steady, banks could see sentiment improve sharply after a period of sideways movement.

Short covering could drive the next leg
Thakkar believes both private sector and PSU banks are “ripe for a good comeback,” especially because parts of the banking pack have built up short positions during the consolidation phase. He said once Bank Nifty shows strength at the 18,000 level, investors could see short covering return to the space.

“I think banking will start outperforming from this level,” he said, underlining his expectation that the sector may once again move into leadership mode.

Indian Bank strategy: Hold above Rs 840
For Indian Bank specifically, the trading strategy remains straightforward. Thakkar's advice is to remain invested as long as the stock does not slip below Rs 840. “Until the stock breaches Rs 840, there is a bright chance of testing Rs 920 levels on a positional basis,” he said.

For investors tracking PSU banks, that makes Indian Bank a stock to watch closely if the anticipated banking rebound gathers pace.