Analysts remain bullish on ICICI Bank
The recent turn of events at ICICI Bank has dented the sentiment. Most analysts are turning cautious on the stock from a near-term perspective. Besides, investigative agencies said the loan disbursement process at the bank could come under scrutiny. These will be a near-term overhang for the stock.
The scrip tumbled 6 per cent on Monday to ~262 , its biggest single-day drop in three years amid the CBI initiating a preliminary enquiry into alleged links between the bank’s CEO Chanda Kochhar and the Videocon group. By Wednesday, however, the counter staged a partial rally, rising nearly 2.2 per cent to ~268 levels on the National Stock Exchange (NSE). By comparison, the Nifty50 index slipped 0.8 per cent during this period.
Despite the near-term concerns, analysts remain positive on the bank as most of its businesses are doing well. A strong capital position (capital to risk assets ratio, or CRAR, at 17.7 per cent), stable net interest margins, or NIMs, (around 3.3 per cent) are crucial, they said.
“The news has surely dented the sentiment. There is a possibility that the bank replaces the current CEO. If that happens, the stock will take a further hit. However, investors should not sell in panic. From a fundamental point of view, the bank is on a stable footing as its banking, home loan, securities and AMC (asset management), among other businesses are doing well,” said G Chokkalingam, founder and managing director of Equinomics Research.
So far in calendar year 2018, ICICI Bank has underperformed the broader markets (S&P BSE Sensex) and the banking benchmark S&P BSE Bankex. The bank’s stock declined around 17 per cent when the benchmarks and the banking index came off 2.3 per cent and 6 per cent, respectively, the ACE Equity data showed.
The bank has an opportunity to gain market share in the banking space as the PSU lenders are struggling with their own internal business challenges and are unable to provide significant competition, said analysts at Sharekhan.
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