ICICI Bank stock check: Amidst PSU banks spotlight, why experts still prefer this private sector lender?

As the 2024 general elections approach, public sector banks have garnered significant attention, overshadowing demand in private sector banks. This shift in focus comes as no surprise, given the remarkable performance of PSU lenders compared to their private counterparts over the past year. Experts suggest that public sector banks are currently better positioned, offering a favorable risk-reward ratio in the prevailing market conditions.

Despite the prevailing favoritism towards public sector banks, one private sector lender stands out as a top pick among experts: ICICI Bank. Despite the overall trend, ICICI Bank maintains its status as a preferred choice for investors and analysts alike, thanks to its strong fundamentals, robust growth prospects, and adept management.

Let's take a look at the fundamental and technical outlook for the stock in the long term. Why is it still a good buy? Here's what experts say.

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Stock Price Trend

ICICI has been giving strong returns in the last one year, jumping over 27 percent as against a 17 percent rise in Nifty Bank. Meanwhile, it has also outperformed its benchmark in 2024 YTD, gaining over 9 percent versus an over 3 percent fall in Nifty Bank. The lender remains the best-performing private bank this year and the only private sector lender in the Nifty Private Bank index to have given positive returns in 2024 YTD.

The stock has added 3.5 percent in March so far, extending gains for the fifth straight month since November 2023. Between November 2023 and March 2024, the stock has gained 19 percent.

It has risen almost 3 percent in February as well as January 2024. Meanwhile, it jumped 6.6 percent in December 2023 and 2.1 percent in November 2023.

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Currently trading at ₹1084.85, the stock is just 2.5 percent away from its all-time high of ₹1,113.35, hit earlier this month on March 6, 2024. Meanwhile, it has advanced 18.5 percent from its 52-week low of ₹844.25, hit on March 27, 2023.

Earnings

In the quarter ended December 2023, ICICI Bank reported a 23.5 percent rise in its standalone net profit at ₹10,272 crore as against ₹8,312 crore in the year-ago period.

India's second-largest private sector lender's net interest income (NII) rose 13.4 percent YoY to ₹18,678 crore in the quarter under review versus ₹16,465 crore in the corresponding period last year. Meanwhile, its asset quality improves with the gross non-performing assets (NPA) ratio declining to 2.30 percent in Q3FY24 from 2.48 percent in Q2FY24. The net NPA ratio was almost flat at 0.44 percent at December 31, 2023, versus 0.43 percent at September 30, 2023.

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Technical View

Om Mehra, Technical Analyst, SAMCO Securities

ICICI Bank has consistently formed higher highs and higher lows in the weekly timeframe. The stock has been trading within a defined range of ₹1,100-1,050 for the last couple of weeks and despite this consolidation phase, ICICI Bank Ltd. is trading above its 20-day and 50-day moving averages.

In the last few days, the delivery volume has increased marginally. This phase suggests an accumulation period, indicating that the primary trend remains strong. The Relative Strength Index (RSI) has consistently held above the 55 levels, signaling strength in the stock.

Although Bank Nifty has seen a decline of nearly 3.8% from its recent swing high, ICICI Bank has remained resilient, holding strong above the key level of ₹1,054. Investors may consider accumulating the stock in stages for a long-term investment horizon.

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Rajesh Palviya, SVP - Technical and Derivatives Research, Axis Securities

The stock is in a solid uptrend across the time frame, forming a series of higher tops and bottoms. The stock is firmly sustaining above its 20-day SMA (1076), indicating positive bias. It is also sustaining above its 50, 100, and 200-day SMA, and these averages are inching up and raising prices. The daily, weekly, and monthly strength indicator RSI is in favourable terrain, showing rising strength across all the time frames. The short-term support zone is located at around 1050-1040 levels. On the upside, the bullish sentiment may gear up towards 1130-1160 levels. Traders are advised to continue to hold long positions and follow strict Stop Losses.

Rohan Shah - Technical Analyst, Religare Broking Ltd

ICICI Bank has been in a steady uptrend for more than 5 months, and currently, the price is trading near record-high levels. After hitting record-high levels (1113), it has been trading in a tight range with a positive bias. The stock is forming an elevated base at its rising short-term moving average (20 DEMA) and 161.8 percent external resistance line. We believe traders can continue to hold their long positions, and thus stock is trading at multiple support zones, it's offering a decent risk-reward trade opportunity. In the short term, we expect the stock to gradually inch higher towards the 1125 and 1160 levels, provided it holds the support zone of 1050-1060.

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Fundamental View

Sharekhan: The brokerage has a buy call on the stock with a target price of ₹1,300, implying an upside potential of 20 percent.

“ICICI Bank remains our top pick in large private banks space and is well positioned to deliver superior performance despite cyclical headwinds. A consistent healthy loan growth trajectory and strong asset quality are helping the bank to sustain strong performance despite NIMs compression. The bank continues to have a negative outlook on NIMs, but it is optimistic that it will be able to hold the margins in line with FY23. NIMs pressure is expected to be partly offset by contained opex growth,” it said

Sharekhan added: The sector is also facing a challenge in terms of tight liquidity, which is likely to call for faster deposit mobilisation to sustain loan growth. For ICICI Bank, deposit growth remains in line with loan growth and LDR remains lowest among large private banks thus loan growth outlook continues to remain healthy for the bank. Overall, the asset quality outlook continues to remain stable along with higher contingent provisions should keep credit costs lower. We believe the bank is likely to sustain RoA at over 2 percent in the near to medium term despite cyclical headwinds," said the brokerage.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.