Kotak Mahindra Bank surges 10% on earnings upgrades and potential MSCI inclusion

Kotak Mahindra Bank surges 10% on earnings upgrades and potential MSCI inclusion
Kotak Mahindra BankBCCL
  • Kotak Mahindra Bank’s share price is up by more than 10% today morning after it posted its earnings yesterday.
  • Analysts are optimistic that the bank’s asset quality and decline in provisioning expenses will help it ride through the next year.
  • Kotak Mahindra Bank may also possibly be included in the Morgan Stanley Capital Investment (MSCI) Global Indices as the latter revises its foreign ownership limits (FOL).
Kotak Mahindra Bank’s share price has skyrocketed by 10% on the back of bullish commentary and target upgrades from brokerages. The bank posted a profit of 27% in the second quarter and its net interest income grew by 17%.

Kotak Mahindra Bank surges 10% on earnings upgrades and potential MSCI inclusion
Kotak Mahindra Bank's stock over the last one monthBSE/BI India

“We increase our FY21 and FY22 earnings by 27% and 20% (respectively), aided by steady revenues and sharp decline in provisioning expenses,” said brokerage Motilal Oswal in its report. It upgraded its rating of Kotak Mahindra bank to ‘buy’, following a gap of 10 quarters.


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Potential MSCI inclusion boost
Kotak Mahindra Bank may also possibly be included in the Morgan Stanley Capital Investment (MSCI) Global Indices as it revises its foreign ownership limits (FOL). This comes after Foreign Portfolio Investor (FPI) limits for Indian companies were relaxed to the sectoral limit.

“Stocks that are being included tend to outperform in the run-up in their inclusion in key indices. Further, we observe that MSCI India index tends to outperform before and post the announcement,” the Morgan Stanley report said. It expects MSCI India to see passive inflows of $2.5 billion on the back of this move.

Even though Kotak Mahindra Bank’s stock is up nearly 25% over the last one month, it still has to recuperate from the impact of COVID-19. As compared to January — before Prime Minister Narendra Modi announced a nation-wide lockdown to prevent the pandemic from spreading — the share price is down over 5%.

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Kotak Mahindra Bank surges 10% on earnings upgrades and potential MSCI inclusion
Kotak Mahindra Bank's share price since JanuaryBSE/BI India

Brokerages bullish post Q2 earnings
“With a strong liability franchise in place, high capital and steady asset quality keeps our view constructive, although balance on loan growth has to improve from here on,” Prabhudas Lilladher analysts said in a note.

Brokerages on Kotak Mahindra BankTarget Price
Motilal Oswal₹ 1,650
ICICI Securities₹ 1,634
Prabhudas Lilladher₹ 1,503
YES Securities₹ 1,6870

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