According to Motilal Oswal AMC's Atul Mehra, large private sector banks represent one of the most undervalued segments of the Indian stock market today. Speaking to CNBC-TV18 on the sidelines of ICICI Securities India Investor Conference 2026, Mehra believes these banks could see a sharp re-rating when foreign investor flows return. The fund manager noted that leading private banks continue to enjoy advantages in attracting deposits and maintain strong asset quality, healthy credit growth, and franchise strength that position them well for future gains.
As reported by CNBC-TV18, persistent selling by foreign institutional investors (FIIs) has weighed heavily on financial stocks despite the sector's strong fundamentals. Mehra explained that 50% of foreign portfolios are in financials, making them the first casualty when investors reduce allocations. The weakness in valuations is largely attributed to overseas investors trimming exposure to India rather than any deterioration in the operating environment for banks. According to Mehra, credit growth is now closer to 14%, which is considered fine, and asset quality is at its best ever.
According to CNBC-TV18, Mehra maintained that his preference remains firmly tilted towards private lenders over state-owned banks. The fund manager revealed that the fund house owns only one major public sector bank while holding multiple large private-sector banking names in its portfolios. He emphasized that private banks as a space have nothing really wrong with them, and the underlying fundamentals remain intact despite subdued foreign participation.
As reported by CNBC-TV18, Mehra attributed the recent lack of enthusiasm among global investors towards India to broader international themes that have dominated capital flows. He noted that global investors have focused on markets benefiting from the artificial intelligence boom and oil-related opportunities, areas where India has not been a direct beneficiary. "India stands on the losing side of both AI as well as oil," Mehra said, adding that being overweight India has hurt many global investors relative to other markets where those themes have generated substantial returns.
