Beaten-down by the coronavirus pandemic aided sell-off that domestic equity markets witnessed earlier this year, private lender IndusInd Bank saw its shares tank 80% between January and March.
IndusInd Bank, beaten-down by the coronavirus pandemic aided sell-off that domestic equity markets witnessed earlier this year, saw its shares tank 80% between January and March. Since then the stock has seen a volatile journey, even gaining 64% between March 25 and March 27. The stock is currently rallying, jumping 30% in the last five days, helped by the news of the promoter group buying an additional stake in the bank. IndusInd Bank shares surged 7% on the 50-stock Nifty on Thursday morning to trade at Rs 535 per share.
Promoters of the bank, earlier on June 7, informed the market regulator their plans of acquiring shares of the lender through secondary markets. IndusInd international Holdings Ltd. and IndusInd Ltd. the promoters of the bank currently hold a total of 14.68% paid-up share capital (diluted). According to the Reserve Bank of India (RBI) promoter group of the bank has to reduce its holding in the entity to 15% in a staggered manner over the years since inception. “The promoters shall now purchase additional shares from the open market within the overall regulatory limit prescribed for promoter equity holding cap,” IndusInd Bank said in a market filing. The stock has moved smartly on the back of good volumes, Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments told Financial Express Online. The stock “is currently sitting on a resistance level which is between 515 – 530. If we can cross this on a closing basis, the next level would be 560 and 580. The stock has a good support at 485,” he added.
IndusInd Bank was one of the worst-hit financial stocks on the markets, as it tanked 80% while most other private lenders limited their losses to as much as 60%. IndusInd Bank has also suffered a rating downgrade by Moody’s Investor Service, taking the lenders long-term local and foreign currency deposit ratings to Ba1 from Baa3 and BCA to ba2 from ba1. The rating outlook is negative. Bank stocks have been performing relatively well despite the uncertainty around the loan moratorium aiding a sharp rise in non-performing assets. The Supreme Court of India is set to hear a case around interest-waiver moratorium period, a ruling against the financial sector could hit the banking industry hard. “While we believe the probability of such a ruling is minuscule, wherein the interest is completely waived, unfavorable judgment could affect the financial stability of the Banking sector and trigger capital calls across banks,” brokerage firm Motilal Oswal said in a report. Waiver of interest on the entire portfolio for a period of three months could impact FY21 operating profits in the range of 44–93% across banks, while for six months, this could result in operating loss for most banks, according to the report.
After ending with gains yesterday, benchmark indices were trading in the red on Thursday morning with S&P BSE Sensex down over 200 points at 34,029 points while the NSE Nifty-50 was at 10,059 points. IndusInd Bank was leading the gainers on Sensex.