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IndusInd Bank's share price nosedived during the past year, around 60% from its peak, prompting fretful reactions from investors trying to guess how much lower it can go's. However, despite stemming from the drop along with the issues raised within the private bank's derivatives portfolio, CLSA's International broker has kept a purely outperform rating.
They also lowered their target price from 1300 to 900, a net decline of 31%. For the past few sessions, the closing price of IndusInd shares hovered around 696.3, so the new cut lumped them with more turbulence along with the uncertainty of potential hidden issues and change in management.
Having shredded over half their value, emotional turbulence and gradual decline in value has left investors seasonally shift their disdain from the bank towards sluggish IndusInd.
The CEO received a one year extension from the Reserve Bank of India instead of the three years that were applied for. “The RBI maybe uncomfortable with my leadership skills." IndusInd Bank chief executive officer Sumant Kathpalia said during an analyst call after the Reserve Bank of India did not approve his tenure extension of three years. The board had approved a three year extension for Kathpalia.
Therefore, CLSA said that the sentiment may become more negative if a PSU banker is appointed at the helm of the bank after his tenure is over.
If there is retail selling in response to the sharp decline in IndusInd Bank’s share price, then there is a uncertainty that would arise in the stock. But over time, CLSA feels also that the bank's fundamentals will take over.
The near term fundamentals for the bank are two. The first is the recovery of the downcast microfinance sector. The second comes from the improvement in banking system liquidity and the RBI's easing cycle — the relief for banking margins.
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