The liquidity-driven rally in financials pulled IndusInd Bank its highest level since September 2018 at Rs 1,796.
IndusInd Bank has rallied over 7 percent so far in 2019 while it rose a little over 16 percent in the last one month. However, it is still nearly 20 percent away from its 52-week high of Rs 2,038 recorded on August 3 on the NSE.
In terms of technicals, IndusInd Bank just breached its 5-days exponential moving average (EMA) placed at Rs 1,727 on the upside on March 27. It is also trading well above its 200-DMA.
HSBC, which maintains a buy rating on IndusInd Bank, sees the stock rallying towards Rs 1,950 in the next 12 months.
IndusInd Bank is one of the fastest growing lenders in India. Its loan market share has more than doubled in the last six years to 1.7 percent. It has a well-diversified loan book with a strong presence in high-yielding niche segments like vehicle financing and micro-finance.
HSBC is of the view that the valuation is compelling relative to direct retail-led peers – HDFC Bank and Kotak Mahindra Bank. Loan growth and ROE prospects suggest that the recent underperformance creates an attractive buying opportunity, it said.
The acquisition of Bharat Financial creates opportunities to deepen the bank’s presence in rural areas, highlighted the note. Overall, HSBC believes the bank’s strong and diversified balance sheet position will deliver an average ROE of 18.5 percent for FY19-20e.
The disclosure that its exposure to stressed IL&FS Group stands at a material 1.8 percent led to the share price underperforming. However, the bank’s overall exposure to stressed sectors is low and its rating profile is healthy and stable.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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