Axis Bank shares surge 11% in 5 days. What's fuelling the rally?

Axis Bank shares hit a fresh 52-week high of Rs 819 apiece on Wednesday after they rallied 4.2 per cent on the BSE in the intra-day trade. At 10:50 AM, the stock of the private lender was trading at Rs 810 per share, up 3 per cent, as compared to a 0.26 per cent gain in the benchmark S&P BSE Sensex.

A combined 10.61 million shares had changed hands on the counter on the NSE and BSE till the time of writing of this report. Including today's intra-day gain, the stock has surged 11 per cent on the BSE in the past 5 trading sessions relative to around 3 per cent gain in the Sensex index. 

On August 30, the Mumbai-based lender had informed the exchanges that it has started issuing debt securities under its Rs 35,000 crore-debt raise plan, announced earlier this year.

"We wish to inform you that the Bank has initiated the process of issuing of the debt instruments, in the form of the Additional Tier 1 Notes in foreign currency, subject to market conditions. This will be a sustainable bond under the Sustainable Financing Framework of the Bank and is part of the existing Global Medium Term Notes programme of the Bank. The Offering Circular for the GMTN programme has been updated on Singapore Exchange Limited (SGX) and the International Securities Market (ISM)," Axis Bank said in a regulatory filing. READ HERE

On the same day, global rating agency Moody's had assigned B1(hyb) grade to Axis Bank's proposed Additional Tier 1 bonds. The rating rank is three notches lower than the bank's general creditworthiness.

Axis Bank's BCA could be upgraded if there is an improvement in asset quality, as reflected in the bank being able to maintain credit costs below its long-run average," Moody’s said in a note.

It added: Axis' BCA could be downgraded if there is a significant weakening in its asset quality, with negative implications on capital and profitability, or if funding weakens as reflected by a deterioration in retail deposits.

Meanwhile, in a separate development, the bank has tied up with BharatPe to expand its merchant acquiring business in the country. As a part of the partnership, Axis Bank will be the acquiring bank for BharatPe’s point of sale (PoS) business, BharatSwipe, and will provide acceptance of credit and debit cards for merchants associated with BharatPe. READ ABOUT IT HERE

In a recent report, global brokerage CLSA turned bullish on select financial counters including Axis Bank on attractive risk to reward for large-cap banks. Besides, it said India's financials have consolidated for the last two to three months after a post-Covid second wave pullback in April and May.

CLSA pegged Axis Bank's price target at Rs 1,050 as it believes normalising asset quality may be a catalyst for the stock in the second half of FY22.

During the April-June quarter, Axis Bank's net profit had risen by 94 per cent to Rs 2,160 crore on a rise in non-interest income and a sharp dip in provisions.

The bank posted net profit of Rs 1,112 crore during the same quarter last year (Q1FY21). Sequentially, the bank had booked a profit of Rs 2,677 crore in the quarter ended March 2021 (Q4FY21).

"Given the healthy asset mix, liability strength, adequate capital and superior customer profile, we believe the bank is poised to face near term challenges and benefit in the phase of normalisation. We continue to remain positive on the company over medium to longer term perspective and maintain our BUY rating on the stock with a revised target price of Rs 860 per share," analysts at Anand Rathi had said in a post-result update.