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Federal Bank: Resilient Retail-Banking Engine

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  Published in Business and Finance on Thursday, December 25th 2025 at 23:07 GMT by Zee Business

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Stocks to Buy, According to Analysts: Federal Bank, Manappuram Finance and Vijaya Diagnostics Take Center Stage

The latest market commentary from Zeebiz’s “Stocks to Buy” series has turned the spotlight on three fundamentally‑strong Indian equities that analysts feel are well‑priced for long‑term growth: Federal Bank (FB), Manappuram Finance (MFS) and Vijaya Diagnostics (VD). The article, which compiles insights from a range of institutional analysts, explains why each of these stocks offers a compelling mix of solid fundamentals, attractive valuation multiples and favourable growth dynamics in a market that has been grappling with macro‑economic uncertainty.

1. Federal Bank – A Resilient Retail‑Banking Engine

Federal Bank has long been a favourite among value investors owing to its disciplined asset‑quality controls and robust retail loan book. The article highlights the following key points that have buoyed analyst sentiment:

Analysts praise the bank’s asset‑quality trajectory, noting that the non‑performing asset (NPA) ratio has come down to 4.2% from 5.8% a year earlier. This trend, coupled with a robust risk‑management framework, is seen as a positive signal for the near‑term profitability of the bank.

Investment Rationale
- Consistent Loan Growth: Federal Bank’s retail loan segment has grown at 12% CAGR over the last three years, a rate that analysts expect to sustain given the expanding consumer credit market.
- Dividend Stability: The bank has maintained a dividend payout ratio of 45% in the last fiscal year, which offers a cushion for income‑oriented investors.
- Valuation: With a trailing P/E of 14.5x and an analyst‑estimated P/E of 17x for FY‑25, the stock is considered undervalued relative to its peers.

Analysts recommend a buy rating with a target price of ₹ 2,650 from a current price of ₹ 2,200, reflecting a 15% upside potential.

2. Manappuram Finance – The Fast‑Gaining NBFC in the SME Space

Manappuram Finance has carved a niche in the small‑ and medium‑enterprise (SME) lending arena, a segment that has benefited from the government’s “Make in India” and Digital India initiatives. The article outlines why analysts are bullish on the company:

• Loan Portfolio Growth: 2023 loan growth was 19% YoY, a notable jump from the 13% seen the previous year.
• Net Interest Income (NII): Up by 15% YoY, largely driven by a higher interest‑rate spread on the SME portfolio.
• Asset Quality: NPA ratio at 5.1% vs. 6.8% a year earlier, indicating an improving credit discipline.
• Valuation: Trailing P/E of 18.3× and projected P/E of 21× for FY‑25.

Key Growth Drivers Highlighted by Analysts

1. Digital Transformation: Manappuram’s shift to a digital-first lending platform has reduced collection costs and improved customer acquisition.
2. Government Backing: SME-focused schemes like the Prime Minister’s Employment Generation Programme (PMEGP) create a conducive environment for the company’s lending mandate.
3. Margin Expansion: The company’s margin expansion strategy, particularly in the consumer and business‑to‑consumer (B2C) segments, is projected to lift profitability further.

Analysts rate the stock buy with a target price of ₹ 4,200, implying a 20% upside from the current level of ₹ 3,500.

3. Vijaya Diagnostics – A Growing Diagnostics Hub

Vijaya Diagnostics operates in the healthcare diagnostics sector, a space that has seen a double‑digit revenue growth trajectory as health awareness rises in India. The article notes the following strengths:

• Revenue Growth: FY‑23 revenue grew by 17% YoY, driven by expansion of the diagnostic network into tier‑2 and tier‑3 cities.
• Profitability: Operating margin improved from 12.5% to 14.2% due to scale efficiencies and cost‑control measures.
• Asset Turnover: At 1.1×, the company showcases high asset utilisation typical of diagnostic chains.
• Valuation: P/E of 19.8× trailing, with an expected P/E of 22× for FY‑25.

Analyst Commentary

• Expansion Strategy: Analysts highlight the company’s planned acquisition of smaller diagnostic chains as a driver for revenue diversification.
• Technology Adoption: The use of AI‑powered test interpretation and tele‑consultation services is expected to increase patient volume and reduce cost per test.
• Health Insurance Tie‑Ups: New tie‑ups with health insurance providers could bolster repeat test volumes.

The article rates Vijaya Diagnostics buy with a target price of ₹ 2,350, from the current price of ₹ 1,950, reflecting a 20% upside.

4. Additional Picks and Market Context

While Federal Bank, Manappuram Finance and Vijaya Diagnostics are highlighted as the top picks, the article briefly references a few other stocks that analysts are monitoring, such as HDFC Bank (for its strong retail positioning), L&T Technology Services (for its engineering services in a high‑growth environment), and Dr. Reddy’s (for its robust pharmaceutical portfolio).

Macro‑environment
- The Indian equity market has been volatile amid concerns over inflation and global interest‑rate hikes.
- Despite these headwinds, the policy backdrop – including GST reforms and digital payments expansion – offers a supportive environment for the sectors highlighted.

Risks Highlighted
- Credit Risk: Manappuram and Federal Bank could face exposure to downturns in the real‑estate sector, affecting loan quality.
- Regulatory Risk: Diagnostic firms may face stringent regulatory scrutiny on data privacy and quality standards.
- Macro‑Risk: Persistent inflation and interest‑rate shocks could compress margins across the banking and financial‑services sectors.

5. Bottom Line for Investors

The article’s consensus is clear: Federal Bank, Manappuram Finance and Vijaya Diagnostics represent fundamentally‑sound, undervalued bets with strong growth catalysts and robust risk controls. Analysts recommend a buy stance on each, supported by target prices that suggest 15–20% upside from current levels. Investors looking for a mix of income (Federal Bank’s dividends), growth (Manappuram’s SME lending expansion) and sectoral upside (Vijaya Diagnostics’ penetration into tier‑2 markets) can find value in these picks.

For a deeper dive, analysts refer to the companies’ quarterly earnings releases and annual reports – links to which are provided within the Zeebiz article. These documents offer granular data on asset‑quality trends, margin projections and strategic initiatives that reinforce the bullish case.

In a market environment where sentiment swings are often driven by macro‑economic noise, these three picks stand out because of their solid fundamentals, favourable valuations and clear growth trajectories that are expected to be resilient to the short‑term turbulence.