Cramer: Banks are the Market's 'Most Undervalued Group'

Financials are the most undervalued group in the market and Fed tapering will eventually be a boon for the sector, CNBC's Jim Cramer said Thursday.

After the recent IPO of Philadelphia area firm Customers Bancorp, Cramer said that because Chairman and CEO Jay Sidhu is running the company "the smartest people in banking want to be bankers again." Sidhu is a veteran of the industry and is best known for building Boston-based Sovereign Bank to be one of the 20 largest banks in the country before its sale to the Santander Group.

Customers Bank, is a community-based bank with $3.5 billion in assets and 14 offices across New York, New Jersey and Pennsylvania, a much smaller company for Sidhu.

"That group is the most undervalued group in the market," Cramer said of the banking sector.

"If you get a little bit of an inflection in the yield curve, what can happen is that a taper is positive for the market because then the banks can start making money on your deposits." Cramer said on "Squawk on the Street."

"They'll make fortunes, and that's why the net interest margin is going up and the banks are the place to be."

Cramer pointed to Citi, which he said has seen a quiet rally, US Bancorp, which he said has "been consigned to the dust bin" and JPMorgan, whose CEO Jamie Dimon is "back and better than ever."

Despite Wednesday's selloff, Cramer said earlier in the show that "the banks never faltered. Why? Because they're selling at like ... book value! They need some inflection."

(Related: Cramer: These Stocks are 'Death Traps')

Cramer said that this reminded him of the 1989-1991 period when then-Fed Chairman Alan Greenspan sought to rebuild bank balance sheets to open up lending. "Those stocks were like stone walls. That's what I'm looking at. The market is being bifurcated here. People want to buy technology. People want to get out of the bond market equivalents. People want to rotate into cheaper stocks."

Another area that Cramer particularly likes is the home building sector.

With foreclosures dropping, he sees a shortage of homes on the horizon. "We don't have enough homes, so go back to Lennar, go back to Toll Brothers," he said. "Hedge funds love to slam these companies down but maybe they should take the other side of the trade."

"I'm not backing away from this group."

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul

Disclosure: Jim Cramer's charitable trust owns shares of JP Morgan.