HDFC Bank remains top pick as Deven Choksey favours large lenders for growth

Deven Choksey, Managing Director at DRChoksey Finserv, believes large banks and non-banking financial companies (NBFCs) remain well placed as credit demand improves and foreign investors continue to allocate money to the sector.

HDFC Bank remains his preferred pick among private lenders due to its upside potential, while also expressing confidence in select pharma, IT and oil-consuming companies.

Choksey said the banking sector could continue to outperform as loan growth remains healthy and valuations are still attractive. He expects larger lenders to benefit more as credit offtake improves over the coming quarters.

“We continue to like the larger loan books, be it State Bank of India (SBI), be it ICICI Bank, or even for that matter, NBFC,” Choksey said. He added that the larger the size of the book, the better the benefits are going to be in the subsequent quarters.”

Choksey favoured HDFC Bank despite ICICI Bank’s recent outperformance. “Preference at this point of time will remain with HDFC Bank,” he said. According to him, the bank has a huge amount of upside potential, while corrective measures could help unlock value. He also noted that the downside risk in HDFC Bank appears lower, making it suitable for higher portfolio allocation.

Choksey said he would rather own companies that consume oil than producers. He believes lower raw material costs are likely to benefit sectors such as speciality chemicals, where companies are securing inputs at lower prices through spot purchases and forward contracts.

Discussing the financial sector, Choksey said recent capital raises by companies such as IIFL Finance and Bajaj Finance indicate confidence in the retail lending opportunity. He said stronger economic activity is encouraging investors to back lenders that are expanding their loan books.

In pharmaceuticals, Choksey advised investors to avoid chasing stocks that have already rallied sharply. While Divi’s Laboratories and Laurus Labs remain portfolio holdings, he does not see them as fresh buying opportunities at current levels. Instead, he prefers large generic drug makers such as Sun Pharma, Cipla and Dr Reddy’s Laboratories.

“They are ready with the products,” Choksey said, referring to companies preparing for upcoming patent expiries in export markets. He added that “15-20% kind of upside cannot be ruled out” over the medium term if execution remains on track.

Choksey said valuations of leading retailers such as Titan and Kalyan Jewellers appear expensive after their recent rally. Instead, he prefers business-to-business jewellery manufacturers that supply large retailers. He identified Shanti Gold as one company worth tracking, although he clarified that his firm has not taken a position in the stock.

Turning to information technology, Choksey said Indian IT companies remain well placed despite rapid developments in artificial intelligence (AI). He believes largecap IT firms are benefiting from increasing AI-related projects, while engineering research and development companies could also gain as demand for embedded technology and digital engineering services rises.

For the full interview, watch the accompanying video

HDFC Bank offers higher upside than ICICI Bank, says Deven Choksey

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