Stock to buy: IDFC First Bank shares can deliver 23% return in 6 months, says Anand Rathi

IDFC First Bank Ltd shares, which are down 16 per cent in 2024 so far, can hit Rs 90 level in the next six months, said Jigar Shantilal Patel of Anand Rathi Share & Stock Brokers in a technical note. Patel said IDFC First Bank has consistently maintained a strong support level in the Rs 70-71 range, despite several challenges from downward market trends. This price range has been tested multiple times, showcasing its ability to hold firm against selling pressure, he said.

"Recently, a bullish divergence has emerged on the daily chart, which is a key technical indicator suggesting a potential upward reversal in the stock’s price. The importance of this support level is further emphasised by the fact that it aligns with the 0.618 Fibonacci retracement level of its previous upward move. This alignment strengthens the case for the stock being an attractive buy at the current price levels," Patel of Anand Rathi Share & Stock Brokers said.

The analyst recommended traders to consider initiating long positions in IDFC First Bank within the Rs 72-74 price range. His analysis indicates a potential upside target of Rs 90, highlighting a positive outlook on the stock's growth prospects. 

The stock closed at Rs 73.42 level on Friday. It hit a 52-week low of Rs 70.45 on August 14.

To mitigate potential risks, Patel asked traders to place a stop-loss order at Rs 64 on a daily closing basis. This stop-loss will help safeguard against unexpected market declines while allowing traders to benefit from the stock's upward potential, the brokearge said. 

On the fundamental front, IDFC First Bank has been consistently missing its guidance on achieving improvement in return profile and Centrum Broking sees FY25 as no different. Post IDFC First Bank's Q1 results in July, this brokerage however noted that the bank has been consistently delivering on balance sheet front despite headwinds in macro  environment. 

“This year it is expected the bank to have higher provisioning cost which would impact the return profile  of the company. Therefore, we believe the expected return profile from investors will only be  attained by the bank post FY26,” it said on July 28, while still maintaining its Buy call and a target of Rs 96 on the stock. 

Axis Securities on July 29 said while FY25 would be a year of normalisation and a flattish performance, the bank is setting the stage to deliver strong growth over FY26-27E, with noteworthy RoA improvement driven by a significant reduction in the C-I Ratio. 

“With the successful execution of the  strategy on improving Opex ratios, we expect RoA to gradually improve to 1.2/1.4 per cent by FY26/27E.  While near-term RoE would be impacted by the recent QIP, we expect IDFC First Bank’s RoA/RoE to range between 1.2-1.4 per cent/12-15 per cent over FY26-27E. The reverse merger is likely to be confirmed by end Q2FY25,”  Axis Securities said on July 19.