Shares of IndusInd Bank jumped as much as 13 percent in intraday trade to hit their fresh 52-week high of Rs 1,186.35 on BSE on September 16.
The stock witnessed a strong traction a day after the Union Cabinet approved a relief package for the telecom sector. IndusInd Bank has exposure to Vodafone Idea and investors see the relief package for the telecom sector as a big positive for banking players such as IndusInd Bank, IDFC First Bank and Yes BANK.
"Banks had generally not made particularly material provisions against credit facilities to Vodafone Idea as there was an implicit expectation that the government will act to ensure the telecom sector remains an effective three-private sector player industry," Shivaji Thapliyal, Lead Analyst - YES SECURITIES, pointed out.
"The new package for the telecom sector significantly increases the chances of Vodafone Idea surviving on an ongoing basis. From this perspective, Indusind Bank stands to benefit more amongst banks within our coverage universe, given their somewhat higher exposure to Vodafone Idea as a proportion of their credit," said Thapliyal.
Ajit Mishra, VP Research at Religare Broking seconds this view.
"This stock has been moving in a band of Rs 960-1,060 for almost five months. After the relief package announcement for the telecom sector, this stock has broken out on technical charts. Vodafone Idea owes roughly Rs 3,500 crore to IndusInd Bank so this could be the trigger," said Mishra.
Time to buy or book profits?
The stock looks poised for scaling new highs in the short to medium term.
The stock may hit Rs 1,200-1,230 in the near term, Mishra believes. He suggested a 'hold' on the stock at the current levels.
Rahul Sharma, Co-Founder, Equity99 pointed out IndusInd bank has 2.5 percent of its total exposure to telcos and has been continuously falling after the AGR news.
"The bank has great potential and now as the telcos issues seem to be resolved, we expect the stock to reach the price of Rs 2,000. One should keep the stop loss of Rs 900," said Sharma.
Vishal Balabhadruni, Research Analyst at CapitalVia Global Research underscored that the stock has given breakout after trading in a narrow range of Rs 960-1,068 and one can see rectangle pattern breakout on the
daily charts also."
The cabinet meeting regarding the telecom and auto sector relief has boosted the sentiments of the banking sector as the issue of NPAs could be resolved at least to some extent," said Balabhadruni.
"The upcoming press conference by the finance minister today regarding the Asset Reconstruction Company Limited and Asset Management Company has also boosted sentiments. The stock seems to be reversing back to the higher levels after a prolonged consolidation and therefore one can expect that the stock may go up to Rs 1,350 in the upcoming sessions," said Balabhadruni.
IndusInd Bank has been posting good financial results in the last few quarters, however, with the overall stress in the industry, the stock had been unable to perform.
For the April-June quarter of FY22, the bank reported doubling of its consolidated net profit to Rs 1,016.11 crore, aided by healthy growth in retail loans and lower NPA provisioning.
The bank had posted a net profit of Rs 510.39 crore in the corresponding quarter of the previous financial year.
Its total income during April-June 2021 rose to Rs 9,362.76 crore from Rs 8,682.17 crore in the year-ago period, according to a regulatory filing by IndusInd Bank.
Interest income was up at Rs 7,574.70 crore, against Rs 7,161.73 crore a year ago.
Recently brokerage firm Sharekhan recommended a 'buy' on the stock with a target price of Rs 1,340.
Sharekhan highlighted that the bulk of the elevated slippages are related to retail/SME loan books on account of the second wave of the pandemic.
However, management has indicated that the worst in NPA addition is behind, and normalization should begin in the second half of this year, said the brokerage.
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