The 29% Club: Meet the Banking Stocks Set to Outperform This Year

Image Source: The Economic Times

Indian banking stocks are back in the limelight as experts expect a breakout year, with eight of the best bets to return over 29% in the next 12 months. The sector's revival is driven by strong credit growth, policy support, and enhanced asset quality, making it an ideal hunting ground for investors looking for solid upside.

Key Highlights:

Breakout Year for Banks: Following a subdued 2024, the Bank Nifty has risen 8.6% in 2025 until now, beating the larger Nifty index. Easier liquidity, lower interest rates, and pick-up in credit demand are behind the renewed buoyancy in the sector.
Top Choices with 29%+ Upside: Eight bank stocks have been picked by analysts to deliver more than 29% returns in a year. These banks are the stables of HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, Federal Bank, AU Small Finance Bank, City Union Bank, and Indian Bank. Recent brokerage targets indicate solid upside, with a number of stocks trading at reasonable valuations in comparison to historical averages.
Why the Rally: Regulatory tailwinds of the RBI, a transition to co-lending models, and India's estimated 10% nominal GDP growth are being touted as major drivers. Banks are also getting help from better deposit mobilisation and risk management focus.
Investor Sentiment Improves: With asset quality having stabilized and margins expected to pick up, institutional and retail investors are once again entering the space, placing bets on a multi-quarter growth cycle.

Outlook: Experts expect 2025 to be a breakout year for bank stocks, providing a rare opportunity for huge returns as India's credit cycle is expected to speed up.

Sources: Economic Times, Angel One, Financial Express