The Nifty and the Sensex have closed at their lowest levels since Aug 2014. The market carnage led by Foreign Portfolio Investors has thrown-up some wonderful opportunities to buy into shares. Several blue chip stocks like ICICI Bank, State Bank of India and, NMDC have fallen to one year lows.

ICICI Bank

ICICI Bank shares hit a 52-week low of Rs 254.80 on the National Stock Exchange. Banking stocks have been hammered out of shape in the recent carnage and since they have a heavy weight in the Sensex any fall in these stocks leads to a fall in the Sensex.

Now, there are a number of reasons why the ICICI Bank stock looks attractive at the current levels. The first is that interest rates in the economy are clearly headed lower because inflation is falling at a rapid pace. In fact, one noted economist termed it as deflationary pressures.

It's almost certain that the Reserve Bank of India would cut interest rates at its meeting later this month. The second reason that for patient investors, is that it is only a matter of time when the economy recovers.

If that happens shares like ICICI Bank, which are a great proxy for the economy could rally sharply. The non performing assets for the quarter ending June 30 declined from 3.78 per cent to 3.68 per cent in the previous quarter. The likely EPS for the bank for the full year will be in the range of Rs 20-22, which means the bank shares quote at a price to earnings multiple of around 12.7 times.

This is extremely attractive for a private sector bank. The price to book under 2 times also makes it a good bet. However, investors can wait till the next week and buy the stock around the Rs 245 levels, where it becomes even more attractive.

State Bank of India

State Bank of India shares like ICICI Bank has slumped to 52-week low of Rs 224.25. While non performing assets would continue to remain a worry for State Bank of India (SBI) there are other things that could benefit the bank immensely in the future.

One is the recent announcement of the government of fresh capital infusion into the bank. The other is the number of steps announced by the government through the Indradhanush plan for public sector banks.

Apart from this the bank will benefit from a sharp drop in interest rates, which looks almost certain. An uptick in the economy would benefit the bank.

On the financial front the gross non performing assets were placed at 4.29 per cent for the quarter ending June 30, 2015 from 4.25 per cent in the previous quarter. The bank may end 2015-16 with an EPS of around Rs 20, which makes the p/e at around 11 times.

This is not very expensive for the country's largest bank. Of course, if there is a further downside of 5 per cent in the bank stock, it would become extremely attractive.

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