Kotak Mahindra Bank Pulls A 'Houdini' On The Charts, Says Analyst

Kotak Mahindra Bank Ltd., which was recently in the limelight after the Reserve Bank of India directed the bank to immediately stop the issue of fresh credit cards and the onboarding of new customers, reported a 17.6% jump in profit.

While the private bank's shares saw a short-term bounce back on Monday, analysts are in a wait-and-watch mode and believe the bank has a long way to go.

Kotak Mahindra Bank's shares were trading higher after falling in the last eight sessions. Hemen Kapadia, senior vice president of institutional equity at KR Choksey Shares and Securities Pvt., said, "Kotak has done a Houdini act as far as technicals are concerned."

A short-term bottom has been made and a bounce-back is underway, he added. While the worst is over for the bank, there is still a long way to go from a medium-term view, Kapadia said.

Discussing Kotak Mahindra Bank's IT infrastructure, Abhay Agarwal, founder of Piper Serica, said that RBI's order raises questions about the management's commitment to customers. He added that he would want to see the changes play out and hopes the bank can set up a benchmark for online customer protection.

With the shares of Britannia surging 6.6% on Monday, Kapadia expects the FMCG sector as a whole to also witness a recovery. According to him, while "the entire pack hasn't done much," it has formed a significant base over the last few months for recovery.

Even on the PSU banks, Kapadia said he would stay away from the pack and wait for volatility to cool off. He called the current fall in the overall space "a knee-jerk reaction" to RBI's order.

"Markets are overreacting" in anticipation of a big event, said Piper Serica's Agarwal. He believes that volatility in the markets will continue to be higher than normal till the election results are announced.

According to Amit Goel, co-founder and chief global strategist at Pace 360, "longer-term bonds are the way to go," keeping volatile markets and global economic data in mind.

While there will be many opportunities in the equity markets, Goel suggested long-term government bonds as a safer bet. According to him, sectors with high operating leverages, like auto and manufacturing, are not good choices.