Market participants say a volatile stock price is a challenge to fundraising, even though the bank has been claimed that it is on track to raise funds.
The shares of YES Bank are seeing a sharp rise. Any idea why?
Could it be media reports of industrialists showing interest in the bank or the fundraising plans of the private lender or promoters paring their stakes?
Or, is it because the time of YES Bank has finally come?
It may be too early to say—the bank is yet to come out with its September quarter earnings and its fundraising plans are also facing hurdles.
Experts, however, say the fundamentals of the bank are showing signs of improvement.
"Fundamentals are definitely looking improved as the cost of money is low and the bank is looking to raise capital. The weakness of the leverage players is out and the ownership of some of the FIIs is reduced," said Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs at IIFL.
"Since the broader market is looking to outperform, there will be more risk-on trade. If you are in the stock, stay put because the worst may be in the price. We don't rule out the target price of Rs 75 for the stock for the coming six months."
In the recent past, the rally in the broader market was underpinned by 20-odd stocks such as HDFC Bank and Bajaj Finance. With signs of better fundamentals, investors want to bet on beaten-down stocks that can outperform the market.
"People want to bet on stocks that are underperforming the broader market such as RBL Bank and YES Bank who have seen drubbings of late. YES Bank will have some truth, some false," Bhasin said.
A day after logging a strong gain of 15 percent, shares of YES Bank continued their ascent on October 18, rising 8.44 percent to Rs 51.40 on BSE.
The stock has been in the green since October 14 and has gained 30 percent in these five consecutive sessions of gains.
The gain has come after sharp losses in September, driven by one of the bank’s promoters selling his stake.
Market participants say a volatile stock price is a challenge to fundraising, even though the bank has been claiming it is on track to raise funds.
Analysts point out that the bank needs money almost equal to its current market capitalisation over the next two-three years and such a raising would happen at well below book value that will hurt minority shareholders.
Uncertainty on this front still surrounds the bank.
Media reports are suggesting industrialists Sunil Mittal and Sunil Munjal have envisaged interest in acquiring a stake in the private lender.
The bank, however, denied any such development, refusing to comment on it, but at first glance, it appears that the market is happy with this speculation as the stock has been witnessing healthy gains after the reports surfaced.
Promoter Rana Kapoor’s holding in the bank declined to 3.92 percent in the September quarter against 4.31 percent in the June quarter.
Is it good for the bank?
"It is positive as the overhang of selling is done. However, now there are two important triggers to be watched—Q2 results and progress on fundraising," said Sameer Kalra, Founder, Target Investing, who has a buy call on the stock.
In the long run, what plays in favour of a company is the faith of its investors. YES Bank has managed to keep the faith of retail investors in the quarter gone by.
The latest data shows, mutual fund houses increased their holding to 9.26 percent in the September quarter from 6.59 percent.
Moreover, with promoters selling their stake, retail investors have bought about 7.6 lakh shares of the company over the past year.
While there are some bright spots, a clear picture will emerge after the September quarter results are announced.
"The September quarter result is important to see the stress on the company's book. That will tell us whether the fundamentals are improving or deteriorating further," said Jaikishan Parmar, Equity Analyst at Angel Broking.
The stock is the high beta one. There is a larger pattern that has completed around Rs 40 which makes it attractive at lower levels at present."The kind of pullback after that drop to Rs 30 level has completely trapped the short-sellers at lower levels. This is a good momentum building up in the stock and as well it is fuelled by short-covering. We may see this momentum further moving up with the next level of resistance around Rs 58 and Rs 72," said Mustafa Nadeem, CEO, Epic Research.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.