Aditya Shah sees PSU banks, SBI and HDFC as key picks amid volatility

Aditya Shah, Founder, Hercules Advisors told ET Now, “Systemic loan growth is about 10%–15%, deposits about 10%. HDFC Bank has grown loans at 12%–13% and deposits at 14%—exactly as management planned. Stock reaction may be muted due to AT1 bond and chairman issues, but business numbers are strong.”

On deposit trends, Shah added, “Deposit growth has been strong since the merger. Even if markets stay tough, some money may return to deposits. The main concern is loans and NIM, which take time to recover.”

Smaller lenders and microfinance are also showing signs of recovery. Shah noted, “The micro-lending cycle has bottomed out. Banks like RBL, Suryoday, and Ujjivan are reporting good loan growth. The war may slow lending briefly, but the cycle had turned before that.”

Public sector banks continue to perform steadily. Shah said, “PSU banks will do well for the next one or two years. SBI is best placed. HDFC Bank offers potential if it resolves internal issues and improves NIM.”

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IDFC First Bank showed mixed results. “Growth may moderate short-term due to a fraud booking, but long-term the franchise is well placed,” Shah explained.
On NBFCs, he highlighted, “Bajaj Finance saw deposits decline this quarter, though 20% loan growth is fine. We’ll monitor management’s response.” For investment picks, Shah advised, “Top PSU pick: SBI. Contrarian pick: HDFC Bank—valuations are low, and growth potential remains. ICICI Bank is also on a growth cycle for the next three to five years.”

Bottom Line
India’s banks are at an inflection point—growth is returning, and asset quality is stabilizing. However, margins, deposits, and global risks remain challenges. Investors should balance opportunity with caution.