For private banks, business grew 18.2% yoy, led by advances up 19.9% yoy and deposits up 16.8% yoy. Notably, these banks have grown faster than the overall sector, with advances growing 1.6x faster than the industry (1.3x in FY14) and deposits growing 1.4x faster than the industry (1x in FY14). 'We expect this trend to persist over FY16-17 as private banks are well-capitalized at present, enabling them to take advantage of likely credit growth opportunities ahead,' said Emkay Global Financial Services.

Emkay prefer banks that are better placed to manage the near-tern sluggish macro-environment, with higher tier-1 capital relative to stressed assets and high NPA-coverage. This would offer protection if asset quality worsens and present a growth opportunity if business growth improves.

'While PSU banks may appear cheap, a sharp near-term re-rating is unlikely, given their low capital adequacy and high share of stressed assets that would make their book-values appear deceptive. Our top picks are HDFC Bank, ICICI Bank, Federal Bank, Yes Bank and DCB Bank,' it opined.

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