ICICI Bank share price outperforms Sensex in the last 1 year. Is there more steam left?

ICICI Bank share price continued its high-hitting spree, reaching a 52-week high for the third consecutive session on Thursday, July 11. ICICI Bank shares opened at ₹1,245.05 against its previous close of ₹1,243.50 and rose over a per cent to hit its fresh 52-week high of ₹1,257.65. The stock, however, erased all gains and fell over a per cent to the level of ₹1,225.05. Around 12:45 pm, the stock traded 1.06 per cent down at ₹1,230.30. Equity benchmark Sensex was 0.20 per cent down at 79,764 at that time.

ICICI Bank shares have outperformed the equity benchmark Sensex in the last one year. Till July 10 close, it has gained about 31 per cent against a 22 per cent gain in the Sensex index over the last year. The stock hit its 52-week low of ₹898.85 on October 26 last year. It is up 38 per cent from its one-year low level.

More steam left?

The stock's fundamentals are healthy, and some experts believe that ICICI Bank stock's current market price justifies its valuation premium.

Manish Chowdhury, the head of research atStoxBox, underscored that ICICI Bank has consistently delivered strong performance, evidenced by superior ROA (return on assets), strong asset quality, and a robust balance sheet.

Chowdhury said after raising deposit rates by ten basis points in February 2024, some impact of this will be visible in Q1FY25.

"The NIMs (net interest margins) are expected to remain stable over the next two quarters before the rate-cut cycle begins. The bank's performance is anticipated to be driven by sustained earnings growth momentum and stable asset quality. We believe ICICI Bank is on track to achieve an ROA above 2 per cent, supported by good asset quality, continued growth momentum, and slightly moderating margins," said Chowdhury.

Some technical analysts believe the stock can rise further from its current level and may attempt to surpass ₹1,350 level.

Pravesh Gour, a senior technical analyst at Swastika Investmart, pointed out that the counter is in a classical uptrend, characterised by higher highs and higher lows.

"On the daily chart, it recently broke out of a triangle formation with strong volume, closing above the ₹1,200+ level. This breakout has initiated a new rally towards the ₹1,300 level. The structure remains very bullish, as it is trading above all key moving averages," said Gour.

"However, momentum indicators such as the RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) are currently negative. On the upside, ₹1,300 is a significant psychological resistance level. If it surpasses this level, we can anticipate a move towards the ₹1,350+ levels in the near term. On the downside, ₹1,160 serves as the support level," Gour said.

Mandar Bhojane, an equity research analyst at Choice Broking, pointed out that on the daily scale, the stock shows a pattern of higher highs and higher lows, suggesting a strong uptrend.

"The Relative Strength Index (RSI) for the stock stands at 63.4, indicating room for potential upside in it. The Stochastic RSI shows a positive crossover, further supporting the bullish sentiment. Notably, it is trading above all major moving averages, highlighting its strength in the market," said Bhojane.

"Based on the technical analysis and current market dynamics, initiating a long position on ICICI Bank at the current market price is advantageous, with a target of ₹1,300 and ₹1,340 and a prudent stop loss set at ₹1,150. Traders should stay vigilant and adjust their strategies in response to changing market conditions," said Bhojane.

On the other hand, some experts believe it could be right time to book some profit in the stock.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, observed that ICICI Bank's stock price has been trading near its 52-week highs, signalling strong performance and investor interest.

However, he advises caution for several reasons.

"Firstly, the stock has exhibited a negative divergence on the daily scale, which often indicates that despite rising prices, momentum is weakening, potentially leading to a price correction. Secondly, the stock's price action is significantly distanced from all major exponential moving averages (21, 50, 100, and 200-day EMAs). This separation suggests that the stock might be overextended and could be due for a pullback to these average levels," said Patel.

"Given these indicators, it is prudent to book profits immediately and refrain from taking aggressive long positions. Additionally, the long-short ratio of foreign institutional investors (FII) is around 80 per cent, indicating a strong bias towards buying. This heavy leaning on the buy side means that even a small market dip could significantly negatively impact large-cap stocks like ICICI Bank," said Patel.

ICICI Bank will report its April-June quarter earnings on July 27. Experts expect the stock to see renewed traction after its Q1FY25 earnings.

Brokerage firm Motilal Oswal Financial Services expects the bank's loan growth to remain healthy, led by retail and SME segments. Net profit may rise by 10 per cent year-on-year. However, margins may moderate slightly.

Nuvama Institutional Equities also expects the bank's margin to decline by 5 bps QoQ and 43bps YoY.

According to Nuvama's estimates, ICICI Bank's net interest income (NII) may be strong at 3 per cent QoQ and 8 per cent YoY in Q1FY25.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.