Rs 59 to Rs 382: This banking stock turned into a multibagger in three years; saw profit-booking in last session

Shares of Indian Bank Ltd have delivered multibagger returns in the last three years. The banking stock, which closed at Rs 58.95 on August 7, 2020 closed at Rs 382.75 today, delivering 549% returns during the period. An amount of Rs 1 lakh invested in the Indian Bank stock three years ago would have turned into Rs 6.49 lakh today. In comparison, Sensex has risen 73.49 per cent during the period. The stock touched a 52-week high of Rs 408 on August 8, 2023 and a 52 week low of Rs 171.65 on  August 23, 2022.  It also logged a record closing of Rs 394.70 on August 8. In the previous session, the stock closed 3% lower at Rs 382.75 on BSE.  

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Indian Bank shares fell 4.99% intraday to Rs 375 against the previous close of Rs 394.70 on BSE. Earlier, the Indian Bank stock opened lower at Rs 388.05. Indian Bank shares have zoomed 121.90 percent in a year and risen 35.56 percent since the beginning of this year.   

Total 2.44 lakh shares changed hands amounting to a turnover of Rs 9.29 crore on BSE. Market cap of the lender fell to Rs 47,669 crore.

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In terms of technicals, the relative strength index (RSI) of Indian Bank stands at 78.1, signaling the stock is overbought. The stock has a beta of 1.3 in the last one year, indicating very high volatility during the period. Indian Bank shares are trading higher than the 5 day, 10 day, 20 day, 50 day, 100 day and 200 day moving averages.       

The public sector lender on July 27 reported a nearly 41 per cent year-on-year (YoY) growth in net profit at Rs 1,709 crore for the quarter ended June 2023 against a profit of Rs 1,213 crore in the corresponding period last year. Net interest income (NII) climbed 26 per cent YoY to Rs 5,703 crore in Q1FY23 from Rs 4,534 crore in Q1FY22. Provisions and contingencies slipped around 22 per cent YoY to Rs 1,740.64 crore during the quarter under review. 

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Here’s a look at what analysts said on outlook of the banking stock.   

Abhijeet from Tips2trades said, "Indian Bank stock price is overbought on the daily charts with strong resistance at Rs 395. Investors should be booking profits at current levels as a daily close below support of Rs 368 could lead to target of Rs 324 in the near term." 

Aditya Gaggar from Progressive Shares said, "In the month of April, Indian Bank has given a breakout from the rounding bottom formation and follow-up buying was also seen. Recently, the stock has completed its pullback move. Trendline breakout in RSI and positive crossover in MACD indicate a continuation of an uptrend. As per the pattern, the target of the pattern arrives at Rs 516."

Gaurav Bissa, VP, InCred Equities said, "Indian bank has been one of the strongest PSU banking names in the last few months. The stock has witnessed strong upside at a time when Nifty PSU Bank index was seen struggling, thus showing stark outperformance against its peers. The stock has recently witnessed an ascending channel breakout on daily charts on back of strong volumes which pushed the price towards Rs 390 level. The stock is currently trading above multiyear swing high of Rs 380 which if sustained on a weekly basis can push the stock towards Rs 430 levels. The stock will witness a fresh breakout on a monthly close above Rs 430. Thus the stock has multiple targets in its upward journey. Hence, investors are advised to hold the stock for the next few months for 10-20% upside with stoploss placed around Rs 350 level."

Brokerage YES Securities has revised upward the target price for the bank to Rs 450 from the earlier Rs 410.  

“The loan growth guidance for FY24 stands at 10-12 per cent and the deposits growth guidance for FY24 stands at 8-10 per cent YoY. The bank has good liquidity and does not intend to push for deposits growth at this point by paying higher rates,” said YES Securities said. Meanwhile, the bank has guided for a total recovery of Rs 8,000 crore in FY24.

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Anand Rathi Share and Stock Brokers has assigned a target price of Rs 386 for the lender. “A strong operating performance combined with moderating provisions led to Indian Bank’s greater profitability; its return on assets (ROA) coming at 0.95 per cent, up 13 basis points QoQ. Asset quality and PCR (Provision Coverage Ratio) improved,” the brokerage said in a report, adding that going ahead, they expect modest slippages as most of the stress has been recognised. With stress from the legacy book recognised, the focus has now shifted to profitability. “We expect the bank to deliver a sustainable 1 per cent RoA from FY25,” the report stated.