Momentum Pick – Rakesh Jhunjhunwala-backed Federal Bank outperforms Sensex by over 35% in 1-yr; analysts recommend buy for these targets

Shares of Rakesh Jhunjhuwala-backed Federal Bank Limited have outperformed the BSE Sensex by over 35 per cent over a 12-month period. The one-year returns given by this stock stand at 88.27 per cent versus 52.6 per cent returned by the 30-share index. On the year-to-date basis, Federal Bank has given 53.5 per cent as returns on investment.

According to the information on the BSE, Rakesh Jhunjhunwala and Rekha Jhunjhunwala together hold 2.1 cr or 1.01 per cent shares in this private sector bank.    

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This stock is the momentum pick for today and this is what a fundamental analyst and a technical analyst opine about this stock.   

At 100.85, this stock was trading almost 6.7 per cent shy of its  52-week high levels of Rs 107.65 which this stock hit on 25 October 2021. This stock was trading 1.1 per cent down from the last closing price on the BSE around 1:15 pm.  

The performance of Federal Bank is in line with sector and the stock is trading above its 5-day, 20-day, 50-day, 100-day and 200-day moving averages. This stock has seen a rising investor participation with delivery volume of 2.01 cr shares on 25 October, which was a 76 per cent rise in five-day average volume.  

The bank posted positive September quarter results. It has seen a 50 per cent jump in its net profit for Q2FY22. At Rs 1479.42 cr, the Net Interest Income (NII) was highest in five quarters. 

Fundamental Analysis – Sandeep Jain – The Tradeswift Director called this bank as an old generation private bank. He said most private sector banks are doing very well. It has been previously recommended by Jain on many occasions. The September quarter was one of its best quarters and the things are only getting better, he said. 

He recommends a buy in this stock for a target price between Rs 140-150. He has a 6-9-months view on this stock.  

Performance of private sector banks could be a good trigger for this stock for a further upside, he said. Jain further said that the stock is available at attractive valuations with price to book (PB) value at 1:5. He said that levels between Rs 80 and Rs 90 is a good buying zone. The downside risks are minimal, he said. 

The Price to Earnings ratio stands at 12.60 with PB at 1.22 as per the information available on BSE website. The Return on Equity (ROE) is 9.6 per cent while the Net NPA to book value stands at 8.48. 

Technical View – Nilesh Jain has a positive view on this stock over short and positional term. This stock has been making higher tops. Investors could see it making higher bottoms indicating some correction in near term. Some profit boking is being seen which should not be a cause of worry, he added. 

The correction has not been with large volumes, which is a positive for Federal Bank.  

Jain, who is Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking said that any correction is a buying opportunity in this stock. The risk-to-reward ratio is favourable at levels around Rs 100. He gives two targets with a short term view at Rs 110 and Rs 115. 

This is also a good candidate for taking long positions, the AVP said.   

Inputs from BSE 

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)