Why Have Yes Bank Shares Surged by 30% This Week?

Yes Bank Ltd shares continued to rally for a fifth straight day, closing the session on Friday with a rise of 8.3% at Rs 51.30 apiece. The stock has been trading in the green since the start of the week and has clocked gains of nearly 30% since then. What exactly fuelled this positive momentum?

Yes Bank shares mainly started gaining ground after media reports suggested that industrialists Sunil Mittal and Sunil Munjal have envisaged interest in acquiring a stake in the private lender. Though the bank later denied any such development, the markets couldn’t seem to avoid the speculation.

Meanwhile, experts now believe that the fundamentals of the bank are starting to show signs of improvement. “Fundamentals are definitely looking improved as the cost of money is low and the bank is looking to raise capital. The weakness of the leverage players is out and the ownership of some of the FIIs (foreign institutional investors) has reduced,” Sanjiv Bhasin, executive VP-Markets and Corporate Affairs at IIFL, told Moneycontrol.

He added that the worst may be over for Yes Bank as investors may now want to bet on the beaten-down stocks as soon as signs of better fundamentals emerge. “Since the broader market is looking to outperform, there will be more risk-on trade. If you are in the stock, stay put because the worst may be in the price. We don’t rule out the target price of Rs 75 for the stock for the coming six months.”

Analysts are also waiting for the bank to release its second quarter earnings for further clarity on the stock outlook. “It is positive as the overhang of selling is done. However, now there are two important triggers to be watched—Q2 results and progress on fundraising,” Sameer Kalra, Founder, Target Investing, told Moneycontrol. Kalra has given a ‘buy’ call on the Yes Bank stock.

Jaikishan Parmar, equity analyst at Angel Broking, also said: “The September quarter result is important to analyse the stress on the company’s book. That will tell us whether the fundamentals are improving or deteriorating further.”

However, some analysts continued to remain cautious given the uncertainty over the bank’s exposure to bad loans. “Stress in the mid-corporate space and Yes Bank’s exposure to this could continue to pressure valuations in the medium term,” Saurabh Kumar, analyst, JP Morgan, said in a note to its clients.