Stock Of The Day: Kotak Mahindra Likely To Recoup 2024 Losses With Citi's 'Buy' Bet With 15% Upside

Shares of Kotak Mahindra Bank Ltd.—which remained volatile throughout 2024—are set for a 15% upside to their two-year high, according to Citi Research, on sustained growth momentum in loans.

The private lender's stock remained rangebound since late October and currently tests the resistance of Rs 1,828 level, which is also near a 2-standard deviation above the 14-day moving average.

A breakout of this zone could send the stock higher to Citi's target of Rs 2,070 apiece in the longer run. The relative strength index was at 48.4.

The stock comfortably trades above the key resistance of a 14-day simple moving average and a 21-day exponential moving average. The counter saw a momentum switch to the upside on the last trading day of 2024 backed by an engulfing candlestick on the daily timeframe.

The scrip rose as much as 2.65% on Thursday while the benchmark Nifty 50 index rose 0.53%. The stock briefly traded in the 'correction territory' in October and had fallen by 6.4% in 2024.

Twenty-seven out of the 44 analysts tracking the company have a 'buy' rating on the stock, 12 suggest a 'hold' and five have a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 10%.

Shares of the lender were upgraded to 'buy' by analysts at Citi while opening a 90-day positive catalyst watch expecting stability in loan growth and lesser compression in margins in the third quarter.

Revamped focus on ActivMoney deposits and wider outreach, strong momentum in advances growth and the extent of NIM moderation at 6-7 basis points sequentially are the key positives for Kotak, Citi said. "Lifting of regulatory restrictions will be key incremental trigger."

Citi also said that Indian banks’ fiscal third-quarter earnings may show a slowdown in credit growth and higher slippage. The loan growth may slow to 2% to 3% sequentially due to deceleration in micro-loans, weak corporate demand and adverse housing-related events, Citi said.

Rise in net interest income lifted Kotak Mahindra Bank's standalone net profit by just 4.8% year-on-year to Rs 3,344 crore in the second quarter. The profit rise was limited due to a sharp rise in provisions by the bank and deterioration in asset quality.