Once in a decade kind of opportunity at 690 odd levels as on 19th March 2025 in my view.
Stock over reacted to the derivative accounting issue worth 2.35% of Networth
The stock is available at 0.7 time fy 26 book value which is just a year from now.
With GNPA at 2.5%, NNPA at 1%, CAR of 16% and a quarterly profit potential of 2500 crores on a b/s size of 6 lac crores, 1500 crores of expected loss is easily absorbable and a 27% reaction on 11th March for that was blown out of proportion.
I am aware that ceo got only 1 year extension when board approved 3 years and there is a sudden discrepancy of 1520 crore which has come out of blue due to derivative hedging issue but we have seen such events in past and the valuation didn't breakdown to such ridiculous levels.
For example ICICI Bank faced issues of CEO fraud, excessive lending to troubled corporates and yet it bottomed out at 1.2 times book Value.
Another example is of Axis Bank when RBI found NPA divergence of 5600 crores worth over 10% of its networth at that time in June 2017. The stock fell only 9% that day and didn't went below 1.8 times book value. CEO sikha sharma didn't got any extension even though board approved 3 years of extension to her as CEO.
Even in the biggest banking fraud which involved Well Fargo having opened millions of fake accounts, the stock fell only 20% from top to bottom and recovered the lost ground in next 5 months.
The reason that I can imagine why IndusInd bank has reacted so violently is due to enormous amount of technical / momentum traders and strategies at play in market these days. Algo based trading coupled with leverage has created a scenario where even a slightest news is creating a monster reaction on downside when everyone is trying to exit at the same time. That is creating the price distortion I have not witnessed before.
Once things settle the market will revalue the bank appropriately and in a years time it should be above 1650 levels valuing it at 1.5 time fY 27 book value.
Note: I am invested in the stock and if you wish to buy this investment please consult your financial advisor and follow a diversified portfolio approach.
Stock over reacted to the derivative accounting issue worth 2.35% of Networth
The stock is available at 0.7 time fy 26 book value which is just a year from now.
With GNPA at 2.5%, NNPA at 1%, CAR of 16% and a quarterly profit potential of 2500 crores on a b/s size of 6 lac crores, 1500 crores of expected loss is easily absorbable and a 27% reaction on 11th March for that was blown out of proportion.
I am aware that ceo got only 1 year extension when board approved 3 years and there is a sudden discrepancy of 1520 crore which has come out of blue due to derivative hedging issue but we have seen such events in past and the valuation didn't breakdown to such ridiculous levels.
For example ICICI Bank faced issues of CEO fraud, excessive lending to troubled corporates and yet it bottomed out at 1.2 times book Value.
Another example is of Axis Bank when RBI found NPA divergence of 5600 crores worth over 10% of its networth at that time in June 2017. The stock fell only 9% that day and didn't went below 1.8 times book value. CEO sikha sharma didn't got any extension even though board approved 3 years of extension to her as CEO.
Even in the biggest banking fraud which involved Well Fargo having opened millions of fake accounts, the stock fell only 20% from top to bottom and recovered the lost ground in next 5 months.
The reason that I can imagine why IndusInd bank has reacted so violently is due to enormous amount of technical / momentum traders and strategies at play in market these days. Algo based trading coupled with leverage has created a scenario where even a slightest news is creating a monster reaction on downside when everyone is trying to exit at the same time. That is creating the price distortion I have not witnessed before.
Once things settle the market will revalue the bank appropriately and in a years time it should be above 1650 levels valuing it at 1.5 time fY 27 book value.
Note: I am invested in the stock and if you wish to buy this investment please consult your financial advisor and follow a diversified portfolio approach.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.