Sumeet Bagadia lists IndusInd Bank as the top ‘Maha Shivratri Pick’; here’s why

As per the expert, IndusInd Bank, currently trading at ₹1,550, has recently broken out of its range by forming a new higher high and higher low, indicating a strong uptrend. The immediate resistance is near the ₹1,690 level, and the current price is exhibiting strong bullish momentum, expected to continue towards the ₹1,800 level. On the flip side, there is robust support near ₹1,440.

Moreover, it is trading above key Exponential Moving Averages (EMAs), including the 20-day, 50-day, 100-day, and 200-day EMAs, indicating robust bullish momentum and suggesting potential for further upward price movement. The Relative Strength Index (RSI) is presently at 57.54, showing an upward trajectory and indicating increasing buying momentum, Bagadia noted.

Additionally, the Stochastic Relative Strength Index (Stoch RSI) exhibits a positive crossover. These technical indicators collectively suggest that the lender may have the potential to reach target prices of ₹1,690 and ₹1,800 in the near term. A prudent strategy would be to consider buying on dips at levels of ₹1,510, advised the expert.

Overall, considering the technical analysis and current market conditions, the bank presents a promising buying opportunity for those aiming for a ₹1,690 and ₹1,800 price target, provided that prudent risk management measures are in place, he added.

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Stock Price Trend

The stock has already jumped almost 39 percent in the last 1 year. In comparison, the Nifty Bank index has advanced 15.6 percent in the last 1 year.

Meanwhile, it has advanced over 6 percent in March 2024 so far after an around 4 percent fall in February and January 2024 each. Overall in 2024 YTD, the stock is down 2 percent versus a 1 percent fall in Nifty Bank.

Currently trading at ₹1,553.75, the stock is over 8 percent away from its 52-week high of ₹1,694.35, hit on January 15, 2024. Meanwhile, it has gained 57 percent from its 52-week low of ₹990.25, hit on March 20, 2023.

Earnings

IndusInd Bank reported a rise of 17.3 percent in its standalone net profit at ₹2,297.8 crore for the quarter ended December 2023, compared to ₹1,959.2 crore in the year-ago period. The bank’s net interest income in Q3FY24 grew by 18 percent YoY and 4 percent QoQ to ₹5,296 crore. Net interest margin came in at 4.29 percent in Q3FY24 as against 4.27 percent in Q3FY23 and 4.29 percent in Q2FY24.

Gross NPL and net NPL ratios were largely unchanged at 2 percent and 0.6 percent, respectively. Slippages were marginally higher at 2.2 percent of loans, with the bulk of the slippages coming from retail loans, especially the vehicle financing book. RoA was at 1.9 percent and RoE was at 15 percent for the quarter under review.

“IndusInd Bank too continues to participate in the healthy economic outlook. The bank’s loan book grew by 20 percent YoY driven by a robust retail segment growing 24 percent YoY…The bank remains on track in executing its strategy of delivering growth, granularity, and governance,” said Sumant Kathpalia, Managing Director & CEO, IndusInd Bank.

Fundamental View

Motilal Oswal: The brokerage has a ‘buy’ call on the stock with a target price of ₹1,900, indicating an upside of over 22 percent.

As per MOSL, IIB has demonstrated consistent performance, marked by steady enhancements in both asset quality and return ratios. Unlike many other banks, all critical indicators including credit cost, margins, and operating expenses are on a positive trajectory, suggesting further enhancements in operational performance. The bank’s robust loan growth and a favorable shift in asset composition towards retail segments are expected to bolster margins, particularly amidst evolving interest rate dynamics, it noted. Additionally, ongoing improvements in asset quality metrics, coupled with efforts to reduce slippages and fortify contingency reserves, provide additional reassurance. With a commendable CET-1 ratio of 16.3 percent, IIB stands well-capitalized, and potential capital infusions from promoters to augment their stake would further strengthen the bank’s capitalization levels, stated the brokerage.

It estimates IIB reporting a 22 percent earnings CAGR over FY24-26, resulting in a RoA/RoE of 2.0 percent/17.3 percent. IIB remains its preferred BUY in the sector.

Emkay Global: The brokerage maintains a ‘buy’ rating on the stock, taking into account its improved earnings and return on equity (RoE) trajectory, as well as stable margins, especially in light of the potential contraction risk faced by its peers. Consequently, it has revised the target price for the stock upward to ₹2,000 per share from ₹1,825 previously, indicating a potential upside of 29 percent.

The bank’s management has reiterated its commitment to prioritise the development of a robust retail franchise, foreseeing it as the primary focus area for the next 2-3 years. Emkay reports that the bank aims to elevate its retail LCR share to 5-52 percent from the current 44 percent, significantly higher than the 26 percent recorded a few years ago. Emkay has accordingly adjusted its earnings estimates by 1-4 percent across FY24-26E, anticipating improved financial performance. It expects the bank to achieve better Return on Assets (RoA) ranging from 1.9 to 2 percent, Return on Risk-Weighted Assets (RoRWA) between 2.6 and 2.8 percent, and Return on Equity (RoE) spanning 16 to 18 percent over FY24-26E, driven by robust growth and stable margins.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 08 Mar 2024, 11:30 AM IST