Is IDFC a good bet ?

Shares of IDFC First Bank have yielded noteworthy profit recently as the stock surged around 27% in a span of 2.5 months.

2022 is coming to an end as the stock has seen some turbulent times during the year. H1CY22 had not been favourable for the stock as it began the year with a decline. The stock was not immune to the shocks received on account of the Russia-Ukraine war as it fell 10.16% on 24th Feb, 2022, the day when Russia launched its attack on Ukraine. By the end of February 2022, the stock had declined over 13%!

But that did not mark the end of the stock’s downward journey. It touched its lowest price point of Rs 28.95 per share in June 2022, marking a decline of 30% in 4 months and down 41% since the beginning of 2022!

However, this marked the end of the stock’s decline as it reversed its direction and began climbing. Although the stock noticed a few minor corrections along the way, it was headed upwards. Moreover, the bank also posted better than ever quarterly results for Q1FY23 with a net profit of Rs 474 crores, its highest quarterly net profit at the time.

After the announcement of such robust results, the scrip climbed over 11% in a single day! The recovery was very fast as it climbed 56.8% in two months to close at a price of Rs 49.15 per share. There was a correction period in the second half of September 2022 when the Board of IDFC approved the divestment of the group’s Mutual Fund arm, but the correction reversed by the end of September and closed at Rs 61.95 per share on Friday, 16th December.

IDFC is not the only banking stock in the limelight these days as other banks’ stocks have been providing record returns. India’s largest PSU, SBI, recently reached a lifetime high of Rs 629.55 per share and grew 15.4% in less than two months. ICICI Bank has reported a growth of 38.6% in 6 months & HDFC Bank surged over 15% in 2.5 months. 

NIfty Bank, which is the NSE index pertaining to the Indian banking sector, recently breached the 44,000 mark, reaching a new lifetime high and growing over 20% on a  YTD basis!! Banking stocks are witnessing significant growth on account of impressive quarterly results, robust balance sheets and improving asset quality, thereby revitalising investor interest in the stock. 

What is the future outlook for IDFC First Bank? 

Fundamentally, a lot of things have been going well for the bank. The bank is actively venturing into new partnerships such as its partnership with Sa-Dhan to provide microfinance solutions to feature phone users or its tie up with Ather energy to provide EV financing schemes. 

It is also undertaking certain marketing initiatives such as the waiver of charges on 25 customer-centric services such as cash deposits, withdrawals, demand drafts, IMPS and SMS alerts. The bank is also working towards creating better products such as the creation of its ‘startup banking division’ which cater specifically to startups.

Moreover, the bank’s debt instruments were recently upgraded from ‘negative’ to ‘stable’ and awarded an ‘IND AA+’ rating by India Ratings and Research. In its latest financial results, IDFC First bank registered a 266% growth in profitability, earning its highest quarterly profits till date in Q2FY23. It had also seen strong improvement in its asset quality and robust growth in core operating income, up 35% YoY.

Technically, the stock recently breached its Resistance line (marked in yellow) at Rs 61.60 but has rebounded back to it. If the stock continues its climb after last week’s correction, it could challenge its next Resistance level at Rs 68.15 per share.

If buyers lose interest in the stock, the stock could fall to test its first Support level (marked in blue) at Rs 58.95 per share. RSI is at 66.30, indicating the stock is neither overbought or oversold as it trades over the 5,20,50,100 and 200 day moving averages.

Interestingly, we at Jobaaj, rather our founder and MD, CA Saksham Agarwal, is very confident about the banking industry stocks in the coming year. Some of the reasons for the same are the growing Indian economy, the spectacular performance by the Bank Nifty index and the structural reforms currently being implemented by the government. Moreover, IDFC was one of the picks he had for great returns! See the entire discussion here: