Karnataka Bank shares dive 6% today amid heavy volumes; here's why

Shares of Karnataka Bank fell sharply in Monday's trade amid heavy volumes. The stock slumped 5.92 per cent to hit a day low of Rs 128 over its previous close of Rs 136.05. Around 2.27 lakh shares changed hands today, which was more than double compared to the two-week average volume of 1.07 lakh shares. Turnover on the counter stood at Rs 2.95 crore, commanding a market capitalisation (m-cap) of Rs 4,033.90 crore.

The lender, in an exchange filing, said it has reported an 8.71 per cent rise to Rs 28,807.04 crore in CASA (Current Account and Savings Account) for the quarter that ended March 31, 2023. Karnataka Bank's aggregate deposits rose 8.69 per cent while the gross advances increased 6.16 per cent.

On a sequential basis, the bank's gross advances, however, slipped 3.68 per cent to Rs 61,326.42 crore in Q4 FY23 from Rs 63,673.34 crore in Q3 FY23, provisional data showed.

"A below-average quarterly update in a rising interest rate scenario has led the stock price to fall towards its support zone of Rs 126. Till the stock doesn't close above the daily resistance of Rs 137, a further fall till Rs 118 looks likely," said AR Ramachandran from Tips2trades.

The stock was last seen trading higher than the 200-day moving averages but lower than the 5-day, 20-, 50- and 100-day moving averages. The counter's 14-day relative strength index (RSI) came at 39.29. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 4.44.

Karnataka Bank has an average target price of Rs 170, Trendlyne data showed, suggesting a potential upside of 31.38 per cent. The stock has a one-year beta of 1.38, indicating high volatility.

In terms of earnings, the lender reported a 105.32 per cent year-on-year (YoY) rise in Q3 net profit, at Rs 300.63 crore, against Rs 146.42 crore in the same quarter last year.

Asset quality improved, with gross non-performing assets (NPAs) falling 8 basis points (bps) to 3.28 per cent from 3.36 per cent in the September quarter (Q2 FY23). The provision coverage ratio (PCR) improved to 80.21 per cent from 73.66 per cent a year ago, the lender said.

Meanwhile, Indian equity benchmarks traded lower in late morning deals amid a highly volatile session, dragged by consumer goods, technology and metal stocks.

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