Macquarie turns bullish on Indian banks, upgrades Kotak, BoB, Paytm

** Macquarie expects Indian banks to deliver ~18% FY28 EPS growth, aided by margin expansion of about 15 bps and easing credit costs

** Says private banks are set for a strong earnings recovery as margins improve and operating expenses moderate

** Brokerage upgrades Kotak Mahindra Bank KTKM.NS, Bank of Baroda BOB.NS, LIC Housing Finance LICH.NS, ICICI Life ICIR.NS and Paytm PAYT.NS to "Outperform"

** Macquarie downgrades PB Fintech PBFI.NS to "Neutral" from "Outperform", citing reduced upside potential

** Says PSU banks are poised to benefit from higher rates, with margin gains helping cushion expected credit-loss costs

** Macquarie says insurance valuations are attractive, with regulatory concerns largely priced in; prefers LIC LIFI.NS on improving margins and lower regulatory overhang

** YTD, financials index .NIFTYFIN down ~11%, banks index .NSEBANK falls ~8%; benchmark Nifty 50 .NSEI down 13.1%