IDFC First Bank oversold on charts, can the stock bounce back after Q2 earnings?

Shares of IDFC First Bank slipped 4% in early deals on Monday even as the lender reported Q2 earnings that met estimates.

IDFC First Bank stock slipped 3.91% to Rs 69.52 in the current session against the previous close of Rs 72.35. Market cap of the bank fell to Rs 61,549 crore.

The banking stock has fallen 10.03% in two weeks and 15% in a month. Amid the current round of correction, the banking stock has turned oversold on charts with a RSI of 24.3. The stock is trading below 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day simple moving averages.

Q2 earnings 

The Q2 earnings performance met expectations of the Dalal Street. The lender reported a 197% rise in net profit to Rs 1,045 crore in Q2 FY27 against Rs 352 crore in Q2 FY26. The bank’s net interest income increased to Rs. 6,184 crore in Q2 FY27, compared with Rs. 5,113 crore in Q2 FY26, registering year-on-year growth of approximately 21%.

The bank’s operating profit rose 35% to Rs 2,539 crore in Q2FY27 from Rs 1,880 crore in the corresponding quarter last year.

Provisions came at Rs 1,137 crore in Q2 FY27 against Rs 1,144 crore in Q1 FY27. This represents a marginal sequential decline of nearly 0.6%.

Price targets 

Brokerage Emkay Global said that GNPA improved to 1.3%, with contingency provisions of Rs 515 crore maintained. Management remains confident of sustaining healthy credit growth and ~500bps of positive operating jaws (income growth > cost growth), supporting further improvement in the C/I ratio. "We expect the bank to report ROA of 0.9-1.2% over FY27-29E; we maintain ADD and our TP at Rs 85, implying 1.2x Sep-28E ABV, said the brokerage.

Axis Securities has a price target of Rs 91 on the banking stock against the earlier Rs 95.

"As excess liquidity eases and the benefit of repo rate hikes is reflected in yields on 31-32% of repo-linked loans, margins are expected to recover from Q4 onwards, while Q3 NIMs could remain broadly stable. The bank has guided for NIMs to improve to 5.8% by FY27-exit and indicated that they could remain at 5.8% in FY28 as well. Management expects the impact of the cumulative 75 bps rate hike on CoF to be limited to 5-10 bps," said Axis Securities.

Nuvama Institutional Equities retained its buy call with a target price of Rs 95.

"Factoring in higher growth, partly offset by some impact of insurance commission capping, we are trimming FY28E/29E earnings estimates by 2%. However, we reckon a steady improvement in RoA/RoE to 1.1–1.3%/9–15% over FY27–29E. Thus, retain ‘BUY’ with a TP of INR95, based on 1.3x Sep-28E ABV (1x at CMP)," said Nuvama.