Bank of Baroda Ltd rallied by over 120 per cent in the last 1 year compared to over 50 per cent upside seen in the Nifty50 in the same period.

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The PSU bank with a market capitalization of more than Rs 53,000 crore hits a fresh 52-week high of Rs 104.70 on the BSE on 8 November, and the recent breakout on the weekly charts from the Cup and Handle pattern indicates a structural uptrend, suggest experts.
 

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The momentum in the stock could take it towards Rs 120 that translates into an upside of about 18 per cent from Rs 102 recorded on 4 November, suggest experts.

A Cup and Handle pattern is considered a bullish continuation pattern that signals strength. The Cup is usually u-shaped and the handle is the retracement from the prior top to about 1/3rd of the vertical height of the cup and looks quite similar to a bowl, Elearnmarkets said in a note.

PSU banking stocks have come under the limelight in the past couple of months and are seen outperforming broader markets.

Bank of Baroda has been a relative underperformer in the PSU banking space. The stock has rallied by over 18 per cent in the last one month, and over 24 per cent in the last 3 months. Experts see the momentum continuing in the short term.

“We expect it to witness catch-up activity, going forward. The share price of Bank of Baroda is seen resolving out of the multiyear downtrend supported by a breakout above a bullish Cup and Handle continuance pattern indicating structural uptrend and offers fresh entry opportunity,” ICICIdirect said in a note.

“We expect the thrust from the recent breakout to lead the share price to Rs 120 in coming months as it is the 80% retracement of the entire previous major decline CY 2019-CY2020 (144-36),” it said.

The breakout above the bullish cup and handle pattern is supported by a strong volume of more than three times the 200-week average volume of 15 lakh shares per week highlighting larger participation in the direction of the trend.

Fundamental View:

Bank of Baroda is among the leading PSU banks with a global loan book of Rs 7.1 lakh crore and has better-operating metrics among PSBs. The bank has a pan-India presence with 8192 branches and 11637 ATMs.

The bank has a meaningful presence in international operations with its joint ventures and subsidiaries. Total 12.4 per cent of business comes from overseas.

“Credit growth is expected to rise with unlocking and speedy economic recovery and comfortable capital position with CRAR ratio of 15.4%. The retail segment, especially home loans, to remain in focus with competitive rates on offer,” said the ICICIdirect note.

The asset quality performance is expected to improve led by steady or lower slippages and healthy upgrades/ recovery. “We believe improving business outlook along with containment of slippages should help the overall performance to improve. We expect RoA of 0.6% and RoE of 9.0% by FY23E, while earnings are projected to grow at CAGR of 144% over FY21-23E,” the note added.

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