Kotak Mahindra Bank which has seen a surge of over 7 per cent in one year compared to an over 9 per cent rise seen in Nifty50 in the same period can be a good buy on dips stock amid volatility in the market. The private sector lender has fallen by about 19 per cent from its recent high of Rs 2,252 recorded on 27 October 2021. The stock seems to be taking support above the 50-DMA placed at Rs 1,770 and 20-DMA placed at Rs 1,782.
Talking about the stock, brokerage firm Anand Rathi said: “Kotak Bank has been under pressure for quite some time but at this juncture, it has turned around from its crucial support. Previously the stock turned from this level and we saw a rally towards 2,250. On the weekly chart, there is a bullish MACE/ bullish cross near the zero line which is looking lucrative. Thus, we advise traders to go long in the stock with a stop loss of 1,725.”
The brokerage firm sees an upside of 15 per cent on Kotak Bank at the current market price of Rs 1,875, for a time frame of one month. And, has set a target price of Rs 2,144.
Q4 Earnings
The private sector lender earlier this month reported a 65 per cent jump in its standalone profit after tax at Rs 2,767 crore in the quarter ended March 2022, helped by higher growth in net interest income and healthy asset quality.
The lender had reported a standalone PAT (Profit After Tax) of Rs 1,682 crore in the year-ago period. For the full financial year 2021-22, PAT increased by 23 per cent to Rs 8,573 crore from Rs 6,965 crore in FY21.
“If you look at our Q4 numbers, our slippages have been extremely under control. On an annualised basis our slippage ratio is 1.08 per cent. Our slippage ratio actually now demonstrates that the quality of our credit book is extremely robust as we exit Covid,” the bank’s managing director and CEO Uday Kotak told reporters.
Consolidated PAT for Q4 FY22 was Rs 3,892 crore, up 50 per cent from Rs 2,589 crore in the fourth quarter of FY21. For the entire FY22, Consolidated PAT increased to Rs 12,089 crore from Rs 9,990 crore in FY21.
Kotak said the consolidated profit is truly broad-based and not dependent disproportionately only on the bank.
He said the bank has a CASA (Current Account Savings Account) ratio of 60 per cent-plus, which has a significant positive impact on cost of funds.
“We are entering into the new world of interest rates going up, with a very high current and savings account ratio. If 60 per cent of my deposit is CASA, that is a very stable cost of fund base. I have always believed that low cost and stable liability franchise is the core to sustainable banking,” he said.
Should You Buy the Dip?
The stock, with a market capitalisation of more than Rs 3.6 lakh crore, has remained resilient amid market volatility. The stock has also given a breakout above the falling trendline channel around Rs 1,800.
Hence, any dips toward Rs 1,800 can be used to create long positions in the stock. A close above Rs 1,870 will give further momentum to the stock which could take it towards Rs 1,950-2,000 in the next 2 weeks, suggest experts.
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