Stocks of ICICI Bank rose 8% on Tuesday, posting their biggest percentage gains in a year, as the investors turn positive over the future prospects of the bank.
Analysts expect ICICI bank shares to outperform in next 12 months despite a rise in gross bad loans ratio to 3.78% in the March quarter, from 3.4% in the previous quarter.
Many brokerages recommend investors to buy ICICI bank shares on dips as value investing will drive the stick prices higher.
"From a long-term investors point of view whether ICICI Bank or any other bank or any other set of stocks, there is clearly no disputing the fact that it is a buy on dips and 15 percent of the highs, 20 percent off the highs is a very decent place for people to start nibbling at the stock if not coming into it in some decent way," CK Narayan, MD at Growth Avenues, told CNBC-TV18.
ICICI Bank, the country's largest private sector bank by assets, reported a 10% increase in net profit for the last quarter of FY15, with retail loans growing 25% in the quarter.
With all the operational parameters being stable, there are high chances of bank shares climbing higher to Rs 425 in the next 12 months, a 40% rise compared to Monday's closing price of Rs 302.30 on the Bombay Stock Exchange (BSE), said Bank of America-Merrill Lynch (BofA-ML) in a note to The Economic Times.
"The stock is down 15% YTD and at 1.7x FY16 adjusted book value (BV), it is the cheapest private bank in India, trading at 30-50% discount to its peers and tad below its 5 year cycle average," BofA-ML added.
BofA-ML sees limited downside for ICICI Bank shares and expects the bank to produce over 22% compounded annual growth rate in earnings per share (EPS) in FY15-18.
"We expect its valuation to move towards its historical high level over the next two years. We continue to recommend BUY, with a STOP Target Price of Rs382 wherein the standalone bank has been valued at 2x FY17E Adj. BV of Rs340 and the subsidiaries fetch Rs43/share after deducting holding company discount of 15%," Reliance Securities said in a note.