Kotak Mahindra Bank shares extend gains, jump 5% today; should you buy, sell or hold?

Shares of Kotak Mahindra Bank extended their gains for the seventh straight session, in sync with the continued rise in domestic benchmarks BSE Sensex and NSE Nifty. The stock settled 5.04 per cent higher at Rs 1,847.60 over its previous close of Rs 1,758.95. Today's sharp rise came after brokerage Nuvama Institutional Equities stated the lender could see a strong momentum going ahead if MSCI (Morgan Stanley Capital International) increases the stock's weight in its May review, due to a drop in foreign shareholding.

Kotak Bank released its March quarter (FY23) shareholding pattern, which suggests that the foreign holding has dropped 147 basis points (bps) sequentially to 41.22 per cent in the bank. Nuvama said this could result in foreign headroom moving to 25.05 per cent compared to 22.38 per cent at present.

"The stock has been languishing for quite some time and the MSCI weight-up trigger could lead to strong momentum," Nuvama said.

In addition, foreign brokerage CLSA recently assigned a 'Buy' rating on the counter with a target price of Rs 2,080.

On the technical front, analysts largely felt that support on the counter could be seen at Rs 1,826, followed by Rs 1,750 level.

Pravesh Gour, Senior Technical Analyst at Swastika Investmart, said, "The counter has been moving in a long consolidation range since November 20 last year on the weekly charts. Now it has formed a double bottom formation at around Rs 1,650-1,700 zone and the same has been confirmed on the breakout above Rs 1,750. The formation of the counter looks lucrative for long-term investors, as it is trading above all important moving averages. On the downside, Rs 1,750 is the important psychological support level and below this, we can expect the Rs 1,700 level during any correction. On the upside, Rs 1,900 is acting as an important psychological level and above this, we can expect the Rs 1,950 level in the near-short term."

Jigar S Patel, Senior Manager - Technical Research Analyst at Anand Rathi Shares and Stock Brokers, said, "Though the counter looks lucrative at the current juncture, one must revisit its past few session performances. One can book profit near its resistance levels of Rs 1,850-1,860 levels and wait for some correction till Rs 1,775 for fresh longs."

AR Ramachandran from Tips2trades said, "Kotak Mahindra Bank faces resistance at Rs 1,864 on the daily charts. Investors should book partial profit at current levels or keep a strict stop loss at the support level of Rs 1,826. A close above the resistance level could lead to a target of Rs 1,888 in the near term."

Meanwhile, Indian equity benchmarks today extended their gains for the seventh straight session, led by gains in banks, financials, automobile, metal and energy stocks.

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