Axis Stock Takes a Plunge on As­set Qual­ity Wor­ries

While some an­a­lysts cut earn­ings es­ti­mates oth­ers viewed it pos­i­tively as it clears the air on the stress

The Economic Times - - Smart -

Mum­bai: Axis Bank stock fell 3.2% on Wed­nes­day af­ter the lender posted a de­cline in profit in the March 2016 quar­ter and said 60% of the loans which are on its ‘watch list’ may turn bad over the next few quar­ters. The ‘watch list’ has loans worth ₹ 22,000 crore. The stock closed at ₹ 464.25, be­low its 200-day mov­ing av­er­age of ₹ 472.22.

While some an­a­lysts cut earn­ings es­ti­mates and down­graded the stock fol­low­ing the dis­clo­sure on watch list ac­counts, pre­dict­ing tough time ahead on the as­set qual­ity front, oth­ers viewed it pos­i­tively as it clears the air on the ex­tent of stress in the lender’s as­set qual­ity and do not ex­pect any fur­ther de-rat­ing.

“In the next one year, pro­vi­sion­ing will be high. But the (watch list) fig­ure pro­vides some clar­ity for the fu­ture. FY17 will be a tough time for the bank but once those ac­counts are recog­nised and pro­vided for, FY18 on­wards you will see num­bers bounc­ing back. I don’t be­lieve the stock will fall much,” Sid­dharth Puro­hit, an­a­lyst at An­gel Broking said.

Gau­rang Shah, vice-president at Geo­jit BNP Paribas Fi­nan­cial Ser­vices said that in the event of an eco­nomic turn­around, there could be write backs from the pro­vi­sions which have al­ready been done. Op­tions data for the month of April and May in­di­cate that the stock may find sup­port in the range of ₹ 440-460 in the near term.

“We have seen fresh call writ­ing at ₹ 460 and ₹ 480 strikes, be­cause of which up­side is lim­ited. Stock should find sup­port near ₹ 425. Buy­ing near sup­port is ad­vis­able,” said Chan­dan Ta­paria, de­riv­a­tive an­a­lyst at Anand Rathi Fi­nan­cial Ser­vices.

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