The recent turmoil in IndusInd Bank Ltd has prompted global brokerage CLSA to reduce its price target for the private sector lender's stock. While maintaining its 'Outperform' rating on IndusInd Bank , the brokerage has lowered its price target from Rs 1,300 to Rs 900 per share. The revised price target is still 31% higher than the current levels.
However, the banking stock, which hit a 52-week low of Rs 605.40 in the previous session was trading on a flat note in the current session.
In the current session, the IndusInd Bank stock fell 0.44% to Rs 681.70 with its market cap declining further to Rs 53,104 crore on BSE today.
However, the stock is oversold on charts zone with its RSI slipping to 18.6 in the current session. IndusInd Bank shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day and 200 day moving averages.
In a year, the stock of IndusInd Bank has fallen 55 per cent and is down 53.55% in six months. IndusInd Bank stock has crashed 35% in two weeks.
After the recent developments, shares of the lender have collapsed over 60 percent from their 52-week high.
"The past few days for IndusInd Bank have been tumultuous for the bank, especially with a one-year extension for the MD," said CLSA.
As a result, investors naturally fear that more issues will arise. Over the next few quarters, there will be lingering uncertainty over more skeletons in the closet and management continuity, said the brokerage.
The brokerage also said that appointing a PSU banker as MD could trigger more correction in the stock.
Additionally, the potential invocation of the promoter’s pledged shares by lenders could add to the uncertainty.
On a positive note, CLSA believes that over time, the lender's fundamentals will take over. The brokerage sees two key positives for the stock in the near term.
A recovery in the microfinance segment and improved banking system liquidity, which, along with potential rate cuts, could provide some relief to margins, it added.
Another brokerage Citi also has a 'Buy' call but trimmed its price target to Rs 1,160 from Rs 1,378 earlier. It has pared IndusInd Bank's earnings estimates for financial year 2025 by 25%.
Emkay Global said stock valuations at 0.8 times estimated FY26 book value have over-discounted the derivatives loss, but that is natural when credibility is an issue.
"IIB is, embarrassingly, in our model portfolio and a top pick for CY25. The derivatives loss, though a one-off, is a setback to management credibility. The transactions should not have been treated as two-legged, when one is purely internal. Applying different standards to each leg made it even worse and the bank was, effectively, overstating NII for an extended period," Emkay Global said.
On March 11, the stock fell to a four-year low of Rs 649 on BSE. Later, the stock ended 27.17% lower at Rs 655.95 in that sesion. Amid huge selling pressure, the stock entered the oversold zone with its RSI slipping to 27.8.
Investor wealth shrinked by Rs 19,059 crore on BSE. Market cap of the bank fell to Rs 51,102 crore against Rs 70,161 crore in the previous session.
The stock has taken a hit from two developments.
On Monday, the lender said that during an internal review of its derivative portfolio, it noted some discrepancies in these account balances. The detailed internal review has estimated an adverse impact of approximately 2.35% of bank’s net worth as of December 2024. This could lead to an adverse impact on its net worth by Rs 1,530 crore. The bank’s net worth stood at Rs 65,102 crore as of December 2024.On some discrepancies in these account balances in its derivative portfolio, the lender said it has appointed a reputed external agency to independently review and validate the internal findings, without disclosing details on the nature of the discrepancies.
"The bank's profitability and capital adequacy remains healthy to absorb this "one-time impact," it added.
Second development, which has affected the stock is RBI clearing reappointment of incumbent bank CEO Sumant Kathpalia for one year only agaisnt against the board’s application for three years. This is negative, said brokerage Nuvama as it believes IndusInd Bank will likely use the one year to transition to a new CEO.