Shares of Kotak Mahindra Bank Ltd have fallen 6 per cent in 2024 so far against a 14 per cent rise in the NSE barometer Nifty 50. But JM Financial expects this underperformance to reverse soon.
In the last one-and-a-half months, Kotak Mahindra Bank shares have declined from a high of Rs 1,870 level to a low of Rs 1,729 levels. It has managed to move above the trend-line resistance today, suggesting further strength to prevail, JM Financial said.
"With the 50-day, the 100-day and the 200-day trading in a narrow range of less than 1 per cent, we expect an expansion in the range. Since the shorter-term EMAs have started trading above the longer-term EMAs, we expect the expansion on back of an up-move," said Neeraj, Agarwal, Technical & Alternative Research at JMFL.
Despite a decline in the Kotak Mahindra Bank stock price in the current series, cumulative futures open interest has declined a mere 5 per cent. "With no short accumulation being observed at these levels, data suggest a lack of directional short interest," JM Financial said.
JM Financial said mutual funds are 'underweight' on the stock in comparison to NSE200 weights.
"On a 5-year data window, the ratio is trading 1.9 standard deviation below the mean level of 0.1098. It is at its 1.7 percentiles," it said.
On the fundamentals side, LKP Securities expects Kotak Mahindra Bank's loan book to grow at CAGR of 18 per cent over FY23-25.Valuing the standalone bank at 2.8 times FY26 BVPS and subsidiaries valuation at Rs 201, it arrived at a target price of Rs 2,124 for the stock.
Kotak Mahindra Bank recently delivered a mixed set of June quarter earnings. The asset quality ratios remained stable, while slippages rose slightly. The moderate growth in unsecured advances affected the yields, but the management continued to guide for mid-teens growth in unsecured lending.
"Growth in deposits has been modest, leading to an increase in the CD ratio to 87.2 per cent. Amid heightened competition for deposits, we remain watchful on the pace of deposit accretion for the bank and the impact on margins over coming quarters. KMB has posted healthy performance despite the RBI ban on its digital sourcing and restriction on new card issuance. We believe that the removal of the ban remains critical for the bank to deliver sustainable growth and earnings," MOFSL said last month.
"We fine tune our earnings estimates and expect KMB’s RoA/RoE at 2.3 per cent/14.3 per cent by FY26. Reiterate Neutral with a target price of Rs 1,800 (based on 2.0x FY26E ABV + INR575 for subsidiaries)," it said.