At what level does IndusInd Bank stock become a Buy? What analysts say

Investors should not rush into IndusInd Bank stock right now, but buy on news flow and in a phased manner, reckons Gaurang Shah of Geojit Financial Services.

Shares of IndusInd Bank were seen trading on a volatile note on Wednesday following the sharp 27 per cent fall in the previous session. The stock had hit an intra-day low of Rs 605, and a high of Rs 695 thus far on Wednesday, and traded around Rs 686 levels – up 4.5 per cent at 10.50 am, even as investors remained cautious following the accounting discrepancies reported by the bank.  IndusInd Bank said it expected to take a 2.35 per cent, or Rs 1,580 crore, hit on its net worth owing to the accounting discrepancies in its forex derivatives portfolio. Apparently, the bank disclosed this after the Reserve Bank of India (RBI) pointed out the alleged non-compliance with accounting practices and a delay in rectifying discrepancies.  At the day's low, the stock traded at its lowest level since December 2020, and had shed 32.9 per cent in the last two trading sessions. The stock's market capitalisation too dropped below the Rs 50,000 crore mark in intra-day deals today.  Historical data shows that so far this calendar year the stock has declined 37 per cent, and has slumped 61.7 per cent since the start of 2024. Earlier in August 2018 - March 2020 period, which coincided with the Covid-19 fall, the stock had tanked 88.4 per cent.    This is not the first time in history that the stock has seen such a drop, said Gaurang Shah, senior vice-president at Geojit Financial Services. Once earlier too, he said, the stock had tanked from around Rs 1,200 levels to around Rs 300 before climbing back in the backdrop of asset quality issues with the commercial loan book.  "That said, we have coverage on the stock but it is difficult to say at what price it becomes a buy. The sad part is the good governance that was expected from the management was not followed and came to light only when the Reserve Bank of India stepped in. Investors should not rush into this stock right now, but buy on news flow and in a phased manner," Shah said.  Technically, IndusInd Bank stock is trading on a fairly weak note across time-frames. The near-term bias for the stock is expected to remain negative as long as the stock trades below Rs 735 levels; above which a spurt to Rs 825 seems possible. As per the yearly Fibonacci chart, the Rs 735 level is the S-1 (support 1) level for the calendar year 2025; hence is likely to act as a key pivot going ahead.    On the downside, the stock has near support at Rs 585, below which a slide to Rs 500-mark seems likely - the S-3 level as the Fibonacci yearly chart.  Meanwhile, the company's promoters - the Hinduja Group and the bank's MD & CEO, Sumanth Kathpalia, have expressed confidence that it shall sail through the crisis, and shall be willing to increase stake if need be. Despite the hit to the net worth, Kathpalia believes the bank will be able to report net profit for the Q4 and FY25.  The market reaction to the development, according to Ambareesh Baliga, an independent market expert, was extreme. For an issue / problem worth Rs 1,500 - Rs 1,600 crore, the markets punished the stock badly that triggered an erosion of over Rs 20,000 crore in market capitalisation (market-cap) in just two days.  "I think the markets have overreacted. That said, the bank has a solid promoter backing who have deep pockets, and they remain fully committed to it. Their assurance has helped stem the losses to some extent. On the regulatory front, RBI has given a one-year extension to the current CEO, during which IndusInd Bank should be able to find a replacement, if needed. As an investment strategy, investors should use the current fall to buy IndusInd Bank stock from a long-term perspective," he said.