Axis Bank Ltd shares have recovered 8 per cent from late January levels after falling for seven months. The stock is sustaining above its 8-day exponential moving average (EMA). If one goes by history, Axis Bank has a relatively stronger seasonality in the second quarter of the calendar year, with the bottom formation in the first quarter. Short coverings looks likely ahead, said Neeraj Agarwal of JM Financial.
The banking stock declined from the highs of Rs 1,340-odd level as observed on July 12, 2024, to a low of Rs 933 level on January 27, 2025. Quarter-to-date, the stock has declined 5 per cent as against an average quarter negative return of 0.3 per cent observed in the last 10 years.
"A negative return over 5 per cent has been observed only on 3 occasions (year 2018, 2020 and 2023) while a negative return of over 10 per cent has been observed only on one occasion (year 2020). Overall data suggest limited downsides from the current levels," Agarwal said.
In the last 10 years, the Axis Bank stock has closed in the green on eight occasions in in the second quarter with an average return of 6 per cent. In comparison to NSE200 weights, mutual funds are under-weight on the counter.
"Post the Covid-19 decline, the ratio of Axis Bank over Nifty has been trading in an upward slopping channel pattern. It tested the lower end of the pattern during the start of the current month and has started moving up in favour of Axis Bank. With the upper end of the pattern at significantly higher levels, we expect strong outperformance to prevail," Agarwal said.
The recent up-move on Axis Bank has been on the back of higher than average traded volumes and delivery volumes. The average traded volumes since the up-move stands at 9.7 million shares as against 8.7 million shares when the stock declined. Similarly, the average delivery volumes for the respective period stands at 6.5 million and 5.9 million shares, Agarwal said.
He noted that the February F&O series started with a cumulative future open interest of 111.3 million shares as against last 3-series average of 69.1 million shares as observed on the day of inception. It currently stands at 101.9 million shares, suggesting short covering. With open interest still on the higher side, Agarwal of JM Financial expects further short coverings to prevail.
On Friday, the scrip was trading 0.89 per cent lower at Rs 999.25.