ICICI Bank

This is India's largest private sector bank, which has seen its stock slide from levels of Rs 314 to Rs 265 currently.

At these levels, the stock has turned attractive on account of a host of reasons. The first and the biggest reason to buy a beaten down stock is when there is increased pessimism. You get valuations which are cheaper, which may yield returns in the long run.

To create a retail franchisee like ICICI Bank is almost impossible for a new bank. This is the country's largest private sector bank and is mammoth in size to fail. Yes, there are problems surrounding non performing assets, but these are unlikely to be there indefinitely.

Bank should improve performance going forward

With the high possibility of an economic recovery, we believe that there is a strong case for banks to get re-rated.

ICICI Bank has seen its stock fall near 15 per cent from recent highs. The bank can report an EPS of 20 in 2018-19. This means the stock is trading at a reasonable p/e of around 13 times. If you apply a p/e multiple of 18, the stock has the potential to reach levels of 360 in the next two years.

ICICI Bank is a great stock to own if non performing assets improve in the coming months.

State Bank of India

The State Bank of India stock is not very far from its 52week low levels of Rs 235. The bank shares have fallen more steeply from levels of Rs 315 to Rs 250 currently. In fact, the shares are down a good 20 per cent from the 52-week highs, which leaves potential for an upside.

In fact, State Bank of India shares can gain similar to ICICI Bank, as and when there is a turnaround in the economy. State Bank of India is the largest bank in the country.  Check stock quote here

Canara Bank

Canara Bank like almost all of the other PSU banks has seen its asset quality deteriorating in the last few quarters. For the quarter ending June 30, 2017, the asset quality worsened to 10.56 per cent (gross NPA) against 9.63 per cent in the previous quarter.

The belief now is that the asset quality is only going to get better going forward. If there is a hint of slight improvement in the asset quality of banks, we are likely to see banking stock prices seeing a sharp rebound. This stock is for those remain optimistic on the economic growth story.

Karur Vysya Bank

Karur Vysya Bank is a relatively stable bank, with no much worries over asset quality as such. The stock has fallen sharply in the last few days, in line with stocks from the sector. The stock is available at a dividend yield of near 2 per cent, with a price to book value of just 1.59.

The gross NPA of the bank for the quarter ending June 30, 2017 was placed at 4.37 per cent. This is not bad at all in the present context. The shares of Karur Vysya are a good pick at the current levels.

Disclaimer

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