Dalal Street gives thumbs down to Axis Bank post Q2. Should you sell?

NEW DELHI: An 86 per cent surge in Axis Bank‘s September quarter profit beat the Street estimates, but investors were left unhappy as loan growth lagged key peers even as credit growth surprised positively.

The stock plunged 5 per cent to a sub-Rs 800 level in Wednesday’s trade. A modest credit growth remains an irritant, said Emkay Global.

The bank’s 10 per cent credit growth for the quarter lagged peers like ICICI (up 17 per cent), HDFC Bank (up 15 per cent) and Kotak Mahindra Bank (up 15 per cent).

Besides, NII growth was muted at 8 per cent YoY on the back of a subdued margin profile as yields continued to remain low. NIM at 3.39 per cent and high opex also masked certain key positives such as moderation in slippages and low restructurings, said analysts.

Analysts, however, are positive on the stock with price targets suggesting up to 27 per cent potential upside. ICICI Securities has revised its target on the stock to Rs 992 from Rs 942, assigning it a valuation of 2.4 times FY23 book.

“Moderating credit cost trend is encouraging and now growth acceleration coupled with NIM improvement would be critical triggers to deliver superior RoEs,” it said.

The bank expects to see higher traction in loan growth in the second half of FY22, with the retail segment seen growing at higher rates.

Nirmal Bang Institutional Equities said that it has trimmed its loan growth estimates, leading to a cut in earnings estimates.

“Lower growth than peers was disappointing despite the bank having the distribution strength and low cost of funds. We retain BUY on the stock with a target price of Rs 976, based on 2.3 times H1FY24 adjusted book value per share,” it said.

JM Financial sees the stock at Rs 950. Emkay finds it worth Rs 1,020 now compared with Rs 960 earlier.

“We believe the bank has undergone a major transformational journey in the past few years, fortifying the balance sheet, building strong capital/provision buffers and revving up the digital banking platform and even the subsidiaries. However, it will have to deliver on growth/core-profitability to re-rate from hereon,” it said.

Axis Bank, JSPL among 21 stocks sending sell signals on MACD charts

NEW DELHI: With the market turning volatile ahead of the monthly F&O expiry, at least 27 stocks including Axis Bank and Grasim Industries were sending ‘sell’ signals on MACD or moving average convergence pergence.

The momentum indicator has signaled bearish crossovers on these stocks — a sign of bearish undertone — hinting at possible downsides in the days ahead.

The list includes Axis Bank, Jindal Steel & Power, Ujjivan SFB, Bharat Forge, Bank of Maharashtra, Hindustan Copper, BEML, DB Realty and Karda Constructions.

Down 1

MACD is known for signaling trend reversals in traded securities or indices. It is the difference between the 26-day and 12-day exponential moving averages. A nine-day exponential moving average called the ‘signal line’ is plotted on top of the MACD to indicate ‘buy’ or ‘sell’ opportunities.

When the MACD crosses above the signal line, it gives a bullish signal, indicating that the price of the security may see an upward movement and vice versa.

Data showed 18 stocks were showing bullish trends. They included Aegis Logistics, UPL, Cipla, LT Foods, Navkar Corporation, Orient Cement, Apollo Hospitals, Max Financial Services JK Lakshmi Cement and LUX Industries, among others.

UP 1

The MACD indicator should not be seen in isolation, as it may not be sufficient to take a trading call, just the way a fundamental analyst cannot give a ‘buy’ or ‘sell’ recommendation using a single valuation ratio.

This is because MACD is a trend-following indicator. Though traders can increase the sensitivity of MACD by using shorter moving averages for computing MACD (e.g. 5-day and 12-day moving averages), the lag effect will still be there. Hence, traders should make use of other indicators such as Relative Strength Index (RSI), Bollinger Bands, Fibonacci Series, candlestick patterns, and Stochastic to confirm an emerging trend.

On Thursday, the index was trading at 18,097.05, down 113.90 points or 0.63 per cent.

‘The range of 18,100-18,000 is a key support for Nifty50. As of now, we do not see any indication of Nifty50 breaching this important support zone on the expiry day itself but it may happen sooner or later. On the higher side, 18,350-18,400 remains a sturdy wall,” said Sameet Chavan of Angel Broking.

Understanding MACD

AXis Bank1

A close look at the stock chart of Axis Bank shows whenever the MACD line has breached above the signal line, the stock has shown an uptrend and vice versa.