IDFC First Bank at over 6-yr high; zooms 47% in 2 months on stable outlook

In the past two months, the stock of IDFC First Bank has zoomed 47 per cent on a stable outlook

Shares of IDFC First Bank rose 3 per cent to hit an over six-year high of Rs 79.20 on the BSE in Thursday’s intra-day trade on the back of heavy volumes. Today, it was quoting at its highest level since October 2016. It had hit a record high of Rs 83.45 on September 28, 2016.

In the past two months, the stock of the private sector lender has zoomed 47 per cent on a stable outlook.

In the upcoming quarterly index review by MSCI Inc, IDFC First Bank has a high probability of entering the India index, according to Emkay Alternative and Quantitative Research.

Global index aggregator MSCI Inc will announce the results of its quarterly review on August 10, and the changes, if any, will come into effect from September 1, as per reports.

At 10:27 am; IDFC First Bank was quoting 3 per cent higher at Rs 79.14, as compared to 0.09 per cent rise in the S&P BSE Sensex. A combined 25.4 million shares changed hands on the NSE and BSE.

IDFC First Bank has transformed from infrastructure to retail banking in four years since its merger, increasing CASA ratio from 8.6 per cent to 49.77 per cent (March 31, 2023) and increased retail deposits from 27 per cent to 76 per cent of total deposits, and set up 809 branches and 925 ATMs.

The bank recorded a profit after tax (PAT) of Rs 2,437 crore in the financial year 2022-23 (FY23), with strong Capital Adequacy of 16.82 per cent.

It has high asset quality, with retail loans having Gross NPA of 1.65 per cent and Net NPA of 0.55 per cent as of March 31, 2023. Overall Gross NPA including infrastructure is 2.51 per cent and Net NPA is 0.86 per cent.

CRISIL Ratings (CRISIL) on June 2 upgraded its rating on the tier II Bonds (under Basel III) of IDFC First Bank amounting to Rs 5,000 crore from ‘CRISIL AA / Positive’ to ‘CRISIL AA+ / Stable’. It also re-affirmed CRISIL A1+ rating on the bank’s existing Certificate of Deposits amounting to Rs 45,000 crore.

The rating upgrade is driven by steady scale up of business, backed by strengthening of both retail asset and liability side franchise, improved asset quality, and expectation of continued improvement in operating and overall profitability. Furthermore, the ratings reflect the bank’s healthy capitalisation level, CRISIL said.

"Over the medium term, the bank’s capital position is expected to remain healthy while its earnings profile continues to improve. The asset quality is also expected to remain stable but as the business continues to scale with higher focus on the retail segment, the bank’s ability to sustain asset quality and profitability along with growth will remain a key monitorable", it said.

Technical View

Bias: Positive

Target: Rs 80.50 - Rs 82.50

Support: Rs 78.60 - Rs 75.80

The stock has logged strong gains in the last four trading sessions, and presently trading firmly above the higher-end of the Bollinger Bands on the daily chart which stand at Rs 78.60. 

Further, the stock has been sustaining above the higher-end of the Bollinger Bands on the weekly chart for the last seven trading weeks, which presently stands at Rs 75.80.

Thus, the support range of Rs 75.80 - Rs 78.60 becomes the immediate support for the stock. In case, the stock dips and trades consistently below this range, the stock could witness profit-taking given the overbought conditions.

In case of profit-taking the stock could test Rs 73-odd levels on the downside. On the upside, the stock could test Rs 80.50 - Rs 82.50 range, indicates the monthly Fibonacci chart.

(With inputs from Rex Cano)