Karnataka Bank can test Rs 160-170, says Aashish Tater

Karnataka Bank can test Rs 160-170, says Aashish Tater, Fortunewizard.com.

Tater told CNBC-TV18, "Karnataka Bank has got very interesting pattern. As per the quant model that we follow, apart from the fundamental picks that we come up with, there could be very interesting development on this particular W that has been formed around that Rs 112.65 mark. So, you have got a clear-cut stop loss."

He further added, "There is a strong market buzz of the company being taken over. It has been talked about for quite some time now, almost two years. But this time, with the volumes and the price action, we feel there is a likely possibility that the stock would go and test Rs 160-170 on charts."

"The bank is planning to extend its branch count to 550 odd levels in FY13. That means you are getting a Rs 2,200 crore company, Rs 4 crore per branch. The valuation seems very lucrative, given deals seen in the past. Centurion Bank of Punjab merger and then its eventual merger with HDFC. Bank of Rajasthan where asset quality was under tremendous question and still there was a very lucrative deal done on that aspect too."

"If that particular development happens, we feel atleast Rs 165 to Rs 180 range would be easily tested on this particular stock. The company may get merged at much higher levels. The book value of the company is Rs 130, Rs 136.8 to be specific. The company is doing an EPS of close to Rs 16-17 mark. The company would grow at 10-12 percent, given few of its NPAs."

"But if I adjust all the small errors that the company has made in the past, we feel on conservative side too, the stock can give you 30-40 percent return from three-four months view, given the momentum and attractive valuations."

Disclosure: No personal positions but safe to assume above stock may have been recommended to clients.