IndusInd Bank shares close 4% higher, extend gains into 5th consecutive session

IndusInd Bank share price closed 4.49 percent higher at Rs 523.20 on BSE on June 11, extending the gains into the fifth consecutive session.

In the five consecutive sessions of gains, the stock has jumped 26 percent.

Shares of the private lender have reversed the course after suffering huge losses recently on asset quality concerns.

Experts attributed the rise in the stock to bottom-fishing along with technical factors.

"There is a technical trigger behind the rise in IndusInd shares. If we look at the monthly chart of the bank, we see it has given a narrow-range breakout because in the last two months it has not been able to surpass Rs 490-480 zone convincingly. The counter was beaten down too," said Chandan Taparia, Derivative & Technical Analyst at Motilal Oswal Financial Services.

"Further 10-15 percent cannot be ruled out on the higher side, which can take it to Rs 530-540 kind of levels. There should be a stop loss of Rs 475 for the next one or two weeks."

On June 10, in a presentation at Morgan Stanley investor conference, the bank showed it was on the path of growth amid challenges posed by COVID-19.

While the physical acquisition was returning to normalcy with relaxation in lockdown, the digital acquisition was scaled up, backed by targeted digital marketing and Video KYC launch, he said.

The bank said its short-term market borrowings were at 10-12 percent only. It expects the share of borrowings to remain range-bound.

The bank is creating provisions ahead of the NPA formation, it has raised PCR from 53 percent to 63 percent in Q4FY20.

In a regulatory filing on June 7, the company said its promoters wanted to buy more stake in the company.

"IndusInd International Holdings and IndusInd Ltd, promoters of IndusInd Bank, currently hold 14.68 percent of the paid-up share capital of the bank. We shall now purchase additional shares from the open market in India," the regulatory filing said.

Promoters Hinduja Group has applied to the regulator (Reserve Bank of India) to raise its stake in the bank to 26 percent from 14.68 percent.

According to RBI norms, a bank needs to bring down its promoter shareholding to 40 percent in the first three years of operations. Thereafter, the bank needs to bring down the promoter shareholding to 20 percent in 10 years and 15 percent in 15 years.

For IndusInd Bank, the promoter equity holding in the bank, as per the RBI norms, is capped at 15 percent.

While the rules say promoters can have only a 15 percent stake in the bank, IndusInd Bank's optimism could be stemming from the RBI allowing Uday Kotak to hold a 26 percent stake (with capped voting rights) in Kotak Mahindra Bank.

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