As per the latest research from DevenChoksey, Axis Bank is being recommended with an "ACCUMULATE" call, reflecting confidence in its resilient core performance despite short-term headwinds. The stock is trading at Rs 1,170, with the 12-month target price set at Rs 1,270, pointing to a potential upside of 8.5%. DevenChoksey highlights that Axis Bank weathered Q2 FY26 challenges with stable asset quality and adept management of regulatory provisions, balancing a modest uptick in net interest income alongside investment in digital initiatives and market share growth. The bank demonstrates strong capital adequacy, prudent risk management, and digital leadership, positioning it as a preferred choice for investors seeking sustained performance in the Indian banking sector.

DevenChoksey’s Investment Thesis for Axis Bank

The house maintains an "ACCUMULATE" recommendation, valuing Axis Bank at 1.7x its expected Mar'27 ABVPS.

Target price is set at Rs 1,270 per share, suggesting moderate near-term upside.

Axis Bank remains fundamentally strong, with core profitability intact despite temporary regulatory provisioning and Priority Sector Lending Certificate (PSLC) costs.

Q2 FY26 results reflect operational resilience amid sectoral shifts and policy changes.

Financial Performance: Modest Growth, Stable Margins

Q2 FY26 Net Interest Income (NII) - The NII rose to Rs 137,446 million, up 2% year-on-year (YoY) and 1% quarter-on-quarter (QoQ), narrowly missing analyst estimates due to measured loan growth. - Net Interest Margin (NIM) stood at 3.73%, down 7 basis points (bps) QoQ and 26 bps YoY, but remained above the internal projection, buoyed by a decline in cost of funds.
Pre-Provision Operating Profit & Bottom Line

Pre-Provision Operating Profit (PPOP) reached Rs 104,125 million, slipping 3% YoY and 10% QoQ, pressured by increased operational expenses, particularly integration and technology spending.

Provisions increased by 61% YoY to Rs 35,470 million, reflecting regulatory directives but declined 10% sequentially.

Reported Profit After Tax (PAT) came in at Rs 50,896 million, down 26% YoY and 12% QoQ, falling short of expectations due to subdued operating profit.

Balance Sheet Dynamics: Growth and Shareholding

Deposit and Advances Trajectory - Total deposits surged 11% YoY and 4% QoQ, with a pronounced shift towards term deposits. - Current Account Savings Account (CASA) ratio moderated to 40%, evidencing preferences for higher-yield locking amid rate trends. - Advances climbed 12% YoY and 5% QoQ, propelled by robust growth in corporate and SME segments. - Small Business Banking loans grew 14%, and rural lending increased by 2%.
Shareholding Structure (As of Sep 2025)

Asset Quality and Capital Adequacy

Resilient Asset Quality Metrics - Gross NPA (GNPA) improved to 1.46%, down 11 bps QoQ, with Net NPA at 0.44%. - Provision Coverage Ratio (PCR) robust at 70%, while all-provisions-to-GNPA coverage reached 147%. - Net credit cost settled at 73 bps, reflecting disciplined risk containment. - The bank holds unrecognized provisions worth Rs 62,430 million, offering an additional cushion of roughly 44 bps beyond the reported Capital Adequacy Ratio (CAR).
Capital Strength

CET1 ratio stands strong at 14.4%, while overall CAR remains healthy at 16.6%.

Management signals no immediate requirement for fresh equity infusion; Tier-2 and AT1 issuances remain prospective and opportunistic.

Strategic Focus: Digital, Platform Partnerships, Premiumization

Execution Highlights - Digital innovation remains at the forefront, with flagship initiatives like ‘Lock FD’ for fixed deposits and a gold-backed credit line on UPI for MSMEs and self-employed borrowers. - Adoption of NEO, Axis Bank’s advanced digital platform, covers 95% of its corporate clientele, boosting transaction flows and customer stickiness. - Premiumization strategies continue with Burgundy segment AUM rising 5% YoY and rural outreach growing to 2,740 branches.

Operating Metrics: Consolidated Financial Table

Guidance and Investor Takeaways

Strategic Outlook - Management expects loan growth to outstrip industry averages by 300 bps over the medium term, led by wholesale and recovering retail disbursements. - NIMs are predicted to bottom in Q3 FY26 should rate policy remain steady, with normalization anticipated thereafter. - Digital franchise and operational efficiency underscore management’s confidence in sustainable shareholder value creation.
Recommendation for Investors

Investors are advised to ACCUMULATE Axis Bank at current levels with a 12-month price target of Rs 1,270.

Strong capital, stable asset quality, resilient operating performance, and strategic digitization initiatives make Axis Bank a prudent choice for portfolios aiming at above-market returns with manageable risk exposure.