IndusInd Bank gains 2% on good outlook; stock up 53% in 3 months

Shares of IndusInd Bank hit a more than 10-month high at 1,238.15 rupees on BSE during intraday trading on Friday in an otherwise weak market on hopes for a bright outlook. The private lender’s stock traded at its highest level since November 2, 2021 and hit a 52-week high of Rs 1,241.85 on October 28, 2021.

At 10:01 a.m.; IndusInd Bank quoted 2% higher at Rs 1,217, against a 1.3% decline in the S&P BSE Sensex. Over the past three months, it has climbed 53%, compared to a 15% rise in the benchmark.

Meanwhile, IndusInd Bank on Thursday approved Sumant Kathpalia’s reappointment as chief executive and managing director for three years from March 24, 2023. READ MORE

In the April to June quarter (Q1FY23), IndusInd Bank recorded a 64.4% year-on-year (YoY) increase in its standalone net profit to Rs 1,603 crore, driven by an increase healthy net interest income (NII). The NII rose 15.8% year-on-year and 3.5% quarter-on-quarter (QoQ) to Rs 4,125 crore, driven by robust business growth.

Additionally, Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) edged up 8 bps and 3 bps QoQ at 2.35% and 0.67%, respectively. Meanwhile, net interest margin (NIM) improved to 4.21% in Q1FY23 from 4.06% in Q1FY22.

That aside, analysts remain bullish on the outlook for agricultural sector loan growth due to good monsoon trends. Loan growth was seen across all products. While the auto finance segment recorded the highest quarterly disbursements in the first quarter of FY23, the CV, UV, cars and tractors segments also recorded robust disbursements. However, disbursements were moderate in the 2 and 3 wheel segment.

“The focus on new growth drivers and investment in the retail franchise to drive growth. Gradual retaliation of liabilities will gradually support the margin trajectory. A healthy provision reserve of 3.4% should keep the cost of credit at normalized levels. Although opex is expected to remain high and stable NIM and healthy inflow will help RoA,” ICICI Securities analysts said.

Analysts at Anand Rathi, meanwhile, believe the bank’s credit growth and profitability should be solid due to the recovery in demand for MFIs and vehicle finance. They also foresee good prospects for companies regarding the government’s infrastructure push, a strong balance sheet and strong liquidity and capitalization.

“Amid rising interest rates, the NIM is expected to hold above 4%. We expect higher margins and moderation in operating expenses to maintain strong operating earnings. On good operational performance, a resumption of business growth and the benign cycle in the cost of credit, profitability should be robust,” the brokerage said, maintaining a “positive” view on IndusInd Bank, with a target price. revised by Rs. 1,300 per share.

Technical view

Bias: Positive

Support: Rs 1,215, Rs 1,205

Resistance: Rs 1,330

IndusInd Bank has been trading with a positive bias since late July 2022, when the stock’s 20-DMA (Daily Moving Average) crossed the 50-DMA.

Additionally, the stock has been holding above the upper end of the Bollinger Band on the daily chart for the past four trading sessions. This contributed to the positive feeling at the counter. The bias will likely remain positive as long as the stock holds above Rs 1,215.

So far this week, the action is also hovering above the upper end of the Bollinger Band on the weekly chart, which stands at Rs 1,206. A weekly close above this should be bodes well for the title.

On the upside, the stock appears to be heading towards the Rs 1,330 level, which is the trendline resistance on the monthly chart.

Momentum oscillators are also in favor of the bulls at the moment. However, in case the title breaks the support at Rs 1,215 and Rs 1,206, a drop to Rs 1,160 seems possible.

(With contributions from Rex Cano)

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