Indian financials will continue to go through uncertainty in FY21-22, said global brokerage firm CLSA in a recent report, and expects the normalisation of growth and ROEs only in FY23. It, however, added that the top four private banks are still winners.

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While uncertainty remains, current disruptions will likely accelerate the pace of market accretion of the top four private banks (HDFC Bank, ICICI Bank, Axis Bank and Kotak Bank) and HDFC Limited among the NBFCs/HFCs. Hence, the 25 percent-50 percent correction provides a good investment opportunity, the brokerage firm noted.

The uncertainty in the financial stocks is mainly on the back of low PPOP growth and a 2-2.5 times rise in credit costs, the report stated.

Within these winners, CLSA said that its top picks are ICICI Bank and Axis Bank (30-40 percent upside) as it expects their retail portfolios to perform in line with HDFC Bank and Kotak Bank. The earnings quality of these banks has improved materially over the past 5-7 years and valuations have priced in too much pessimism, it noted.

ICICI Bank and Axis Bank have declined 31 percent and 42 percent just in 2020, which makes its valuations pretty reasonable for investors. Meanwhile, HDFC Bank and Kotak bank have seen a below 20 percent fall in 2020.

The brokerage has 'buy' ratings for Axis Bank, ICICI Bank, and HDFC Bank but has downgraded HDFC and Kotak Bank.

Here's a list of CLSA's recommendation and target price changes for these financial stocks: