3 bank themes playing around India's long-awaited economic revival

Yes, they will benefit the most.

The Indian economy is recovering following a prolonged slowdown and three bank themes are seen to play it.

According to a research note from Maybank Kim Eng, with a strong government in place, policy initiatives in infrastructure and manufacturing are expected to push growth.

Banks, as a close proxy to the economy, should benefit the most. The report argued that this revival will drive growth and re-rating for banks.

Here’s more from Maybank Kim Eng:

Our positive view stems from government actions to address key policy issues and strong improvement in credit growth and asset quality in the near to medium term.

Further lower fiscal deficit and RBI’s accommodative stance, coupled with a buoyant capital market, will stimulate growth for banks. A rate cut by Jan’15 would be yet another catalyst.

Our top picks in the sector are based on three themes:

1) beneficiaries of economic recovery (SBIN and PNB);

2) re-rating story in private banks (AXSB); and

3) regional banks with niche at attractive valuations (FB and VYSB). We also initiate coverage on BOB with SELL, YES with HOLD and HDFCB, ICICIBC and IIB at BUY.