ICICI Bank net profit seen rising 9% year on year; how to trade the stock

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ICICI Bank is scheduled to report its earnings for the quarter ended December 31 on Wednesday.

The private sector bank is expected to report a 9.1 per cent YoY growth in net profit for the quarter ended December 31 to Rs 2,456 crore, as compared to Rs 2,250 crore reported in the year-ago period, according to an ET Now poll.

Net interest income, or the difference between interest earned and interest paid, is seen rising by 21 per cent on a year-on-year basis.

Net interest income surged to Rs 4,238 crore, up 21.1 per cent, in the December quarter, as compared to Rs 3,499 crore reported in the corresponding quarter of the previous year, added the ET Now poll.

Shares of ICICI Bank have been under pressure so far in the year 2014. The stock has plunged a little over 7 per cent in the same period, as compared to a little over 2 per cent fall in the BSE Sensex.

ICICI Bank reported better performance in the last quarter (Q2FY14) in terms of improvement in asset quality, as well as other parameters. The stock price saw upsides post Q2 results; however, the stock price faced resistance at Rs 1,200.

After the results for the quarter ended October, analysts at top brokerage firms expects ICICI Bank to rally above Rs 1,300 levels in the next 12 months.

Given that ICICI Bank has been under pressure in the run-up to its results, the private sector bank may see some bounceback on the back of better-than-expected results for the December quarter.

However, any bounceback on the back of results may be short-lived as the whole rate-sensitive space is feeling some bit of pressure after the Reserve Bank of India (RBI) hiked repo rates by 25 bps yesterday.

"With the RBI monetary policy announced on Tuesday, banks are already seeing selling pressure. So, we expect the bank to deliver better than expected results for this quarter too," said Nidhi Saraswat-Senior Research Analyst, Bonanza Portfolio Limited.

The stock is likely to test Rs 950 in the extreme short term, say analysts. Investors are advised to book profits in the stock around Rs 1,050 and the fresh long positions can be initiated near Rs 950, they say.

We have collated views and recommendations from various analysts on how to trade Maruti Suzuki ahead of Q3 results:

Shubham Agarwal, AVP/Sr Technical Analyst, Motilal Oswal

On the long-term scale, the stock has been consolidating within a broad range of Rs 1,200-800. The relative strength chart of ICICI Bank compared to Bank Nifty has been moving up after a long consolidation. The scrip can remain an outperformer in the banking space.

Nifty is placed at an important support of 6,120. A breach below this support could push it towards 5,950.

ICICI Bank, being one of the index heavyweights, is bound to be exposed to the market volatility at this juncture.

From its past data, it is observed that on the result day the price action is usually mute but momentum unfolds post the announcement of results in the following days. The immediate existing support for the stock is placed near Rs 995 whereas Rs 1,080 remains to be an immediate hurdle. Hence, a breach outside this range could attract directional momentum.


Nidhi Saraswat-Senior Research Analyst, Bonanza Portfolio Limited

With the RBI monetary policy announced on Tuesday, banks are already seeing selling pressure.

So, we expect the bank to deliver better-than-expected results for this quarter too.

However, the rally if seen may be short-lived, and may witness resistance at 1,050-1,070 in the near term. Investors can hold their decision to buy until the results are out, and may buy the stock preferably in more correction and when there is more clarity on the trend.

Ranajit Kumar Saha, Sr Manager - Technical Research at Microsec Capital Ltd

ICICI Bank has corrected around 18.90 per cent from its recent high of 1,206.60 made on the 9th of December, 2013. The stock is likely to test Rs 950 in the extreme short term.

We recommend booking profits in the stock around Rs 1,050 and the fresh long positions can be initiated near Rs 950.

We advise traders to buy ICICI Bank 1,000 February put option at Rs 27 and sell 950 February put option at Rs 14.

Tushar Pendharkar, Equity Strategist at Right Horizons Financial Services

We believe that pressure of NPAs and slow growth in corporate lending has discounted the valuation of ICICI against its peers. However, increased focus on retail banking, rising spread between interest earned to interest expended and significant growth reported in book value has strengthened bank's operating record and dragged the valuation close to its historic low.

Economy is reflecting signs of improvement and we believe that with the improvement in economic conditions, things would come on track which will further aid the banking system.

I would suggest investors should accumulate the stock at current price levels.
 

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