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
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.
540 575 520 550 540 521 415 505 480