IndusInd Bank gains 2% on strong outlook; stock up 53% in 3 months

Analysts expect that the bank's credit growth and profitability is expected to be strong on account of revived demand in MFI and vehicle finance.

Shares of IndusInd Bank hit an over 10-month high of Rs 1,238.15 on the BSE in Friday's intra-day trade, in an otherwise weak market, on hopes of bright outlook. The stock of the private lender traded at its highest level since November 2, 2021 and had hit a 52-week high of Rs 1,241.85 on October 28, 2021.

At 10:01 am; IndusInd Bank quoted 2 per cent higher at Rs 1,217, as compared to 1.3 per cent decline in the S&P BSE Sensex. In the past three months, it has zoomed 53 per cent, as against 15 per cent rise in the benchmark index.

Meanwhile on Thursday, IndusInd Bank approved the re-appointment of Sumant Kathpalia as managing director and chief executive officer for three years with effect from March 24, 2023. READ MORE

In the April-June quarter (Q1FY23), IndusInd Bank reported 64.4 per cent year-on-year (YoY) rise in its standalone net profit to Rs 1,603 crore, led by healthy increase in net interest income (NII). NII was up 15.8 per cent YoY and 3.5 per cent quarter-on-quarter (QoQ) to Rs 4,125 crore, driven by robust growth in business.

Besides, gross non-performing assets (GNPA) and net non-performing assets (NNPA) inched up slightly by 8 bps and 3 bps QoQ to 2.35 per cent and 0.67 per cent, respectively. Meanwhile, net interest margin (NIM) improved to 4.21 per cent in Q1FY23 from 4.06 per cent in Q1FY22.

That apart, analysts remain bullish on prospects of loan growth from the farm sector due to good monsoon trends. Loan growth was witnessed across products. While vehicle finance segment witnessed highest quarterly disbursements during Q1FY23, CV, UV, cars, and tractor segments, too, saw robust disbursements. However, disbursements were muted in 2-wheeler and 3-wheeler segment.

"The focus on new growth engines and investment in retail franchise to aid growth. The gradual retaliation of liabilities will gradually support margin trajectory. Healthy provision buffer of 3.4 per cent is expected to keep credit cost at normalised levels. Though opex is likely to remain elevated, steady NIM and healthy collection will aid RoA," analysts at ICICI Securities said.

Analysts at Anand Rathi, on the other hand, believe that the bank's credit growth and profitability is expected to be strong on account of revived demand in MFI and vehicle finance. They also forsee bright corporate outlook on the government’s infra push, sturdy balance sheet, and strong liquidity and capitalisation.

“In the rising interest-rate context, NIM is expected to hold above 4 per cent. We expect higher margins and moderation in operating expenses to keep operating profits strong. On the good operating performance, a pick-up in business growth and the benign credit-cost cycle, profitability is expected to be robust,” the brokerage firm said, retaining 'positive' view on IndusInd Bank, with a revised target price of Rs 1,300 per share.

Technical View

Bias: Positive

Support: Rs 1,215, Rs 1,205

Resistance: Rs 1,330

IndusInd Bank has been trading with a positive bias since late July 2022, when the stock's 20-DMA (Daily Moving Average) crossed the 50-DMA.

Further, the stock has been holding above the higher-end of the Bollinger Band on the daily chart since the last four trading sessions. This has aided the positive sentiment at the counter. The bias is likely to remain positive as long as the stock holds above Rs 1,215.

So far this week, the stock is also held above the higher-end of the Bollinger Band on the weekly chart, which stands at Rs 1,206. A weekly close above the same should augur well for the stock.

On the upside, the stock seems headed towards Rs 1,330-level, which is the trend line resistance on the monthly chart.

The momentum oscillators are also in favour of the bulls for now. However, in case, the stock breaks the support at Rs 1,215 and Rs 1,206, a dip to Rs 1,160 seems possible.

(With inputs from Rex Cano)