Diwali 2026: Will banking stocks shine in Samvat 2083? Analysts list top picks

ETMarkets.com

The Nifty Bank index hovered around 58,000 during last Diwali, celebrated around October 20, 2025. The index briefly crossed 61,000 in February before dropping below 50,000 in April. The index currently hovers around 55,500.

HDFC Bank's seesaw trade

This came as several heavyweight banking stocks saw sharp upturns and downturns. The most notable among them was volatility in HDFC Bank shares. India’s largest private lender saw a sharp drop in share price after the bank’s former part-time Chairman Atanu Chakraborty resigned, saying some practices within the bank did not align with his personal values and ethics.

Later the stock recovered some of the losses as the leadership worries were addressed. The company appointed ICICI Group veteran Anup Bagchi as its MD & CEO, replacing Sashidhar Jagdishan whose term ended in October. Despite the recovery, the stock is down nearly 28% since Diwali last year.

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Yes Bank, however, tops the list in terms of losses as the stock has fallen more than 32%. ICICI Bank, Kotak Mahindra Bank and Axis Bank shares meanwhile have recorded up to 5% gains, while SBI and PNB shares jumped 10% and 2% respectively.

Here is how the bank stocks performed since Diwali last year:

What lies ahead for banking stocks?

The banking sector looks well placed as the new Samvat begins. Credit demand is steady across retail, small business and corporate segments, asset quality at most lenders is under control, and easier interest rates should support loan growth and profits in the coming quarters, said Vinit Bolinjkar, Head of Research at Ventura. Banks are also working to improve deposit growth, which has been the main concern for the sector, and many are now pricing deposits more carefully to protect margins, he said.

According to the analyst, banks that can grow loans steadily without taking undue risk are likely to be rewarded by the market over the next year.

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Which bank stock to buy in Samvat 2083?

ICICI Bank continues to remain an attractive investment underpinned by strong deposit franchisee, resilient margins, strong credit portfolio, pristine asset quality, and best-in-class profitability metrics, said Sunny Agrawal, Head of Fundamental Research at SBI Securities. With the systemic advances growth trending above 17-18% YoY and renewed traction in the unsecured segments post asset quality stabilization, ICICI Bank stands to benefit the most, he said. ICICI Bank was also among Angel One’s top Diwali picks.

The analyst from SBI Securities noted that Karur Vysya Bank is executing well across key metrics with RoA trending above 2% over the past quarters. Margins are expected to expand from the current levels, with the management guiding net interest margins to trend in the range of 3.7-3.8% for FY27. Asset quality has witnessed marked improvement over the past years underpinned by the bank's conservative underwriting approach, Agrawal added.

Ventura meanwhile named HDFC Bank among its top Diwali picks, saying that the company’s investment case is driven by strong asset quality, robust capitalisation and improving balance-sheet positioning. “HDFC Bank is a good core holding for long-term investors. It is a quality franchise that has been settling after its merger, and as deposit growth picks up and the loan book grows in line with deposits, margins and return ratios should improve from here. Its scale, strong brand and disciplined risk management also offer stability in case markets turn volatile. For investors building a banking portfolio, it works well as an anchor position,” said Vinit Bolinjkar, Head of Research at Ventura. He named Federal Bank and Karur Vysya Bank as his banking picks among the mid-sized private lenders.

Bolinjkar from Ventura noted that Tamilnad Mercantile Bank is a smaller but well-run bank with a loyal regional base, strong control over bad loans and a conservative approach to lending. Its clean books and steady earnings make it an attractive pick for investors who prefer safety along with growth. Bank of Maharashtra is his pick among public sector banks, supported by strong loan growth, low stressed assets, efficient operations and better returns than many of its peers.

Kotak Mahindra Bank meanwhile was among Motilal Oswal Financial Services’ top Diwali picks. The brokerage said that the bank is poised for healthy growth across retail, small business and corporate lending, with loan growth guided at 1.5-2x nominal GDP growth.

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