Investors in Bandhan Bank Ltd have lost nearly 42,000 crore over the past two months, following concerns over high promoter stake and its exposure to troubled Infrastructure Leasing & Financial Services Ltd (IL&FS).
Since 9 August, when it closed at a record high of 729, Bandhan Bank has lost nearly 50%, eroding its market value by half from 87,000 crore. In the same period, S&P Bankex, a broad gauge of banking stocks, has fallen around 14% while the benchmark 30-share Sensex has dropped around 12%. The fall in Bandhan Bank’s shares has wiped out nearly all the gains for those who purchased its shares in its initial public offering.
On 10 October, the lender disclosed a 390 crore exposure to IL&FS group, which accounts for only 1% of its total outstanding loans. The management clarified that there is no other investment or non-funded exposure to IL&FS, nor is there any other great exposure.
Recently, the RBI barred Bandhan Bank from opening new branches and froze the remuneration of its managing director and chief executive officer Chandra Shekhar Ghosh, after it failed to meet rules on promoter shareholding.
According to RBI guidelines, Bandhan Bank promoter Bandhan Financial Holdings Ltd must reduce its stake to 40% from 82% within three years of commencing operations. The deadline for Bandhan Bank to do this was 23 August. Thereafter, banks are required to reduce their shareholding to 20% and 15% within 10 years and 12 years, respectively. The lender has said it is taking necessary steps to comply with licensing conditions and shall continue to engage with the RBI in this regard.
Bandhan Bank broke the Fibonacci confluence zone of 575-581 with a big bear candle. The stock consolidated between the 547 and the 581 levels for six months in a row and then a huge fall again came in. The entire Fibonacci grid came has come from the lower high of 694 and that was the first sign of weakness. A stock making its grid from the lower high is an indication that the stock is contracting. Second the stock also broke the trend line, the stock made a trend line as resistance after breaking it which was the confirmation of the fall. The 61.8% of the Fibonacci retracement lies at 512.45 which was broken was back.
A stock breaking the zone is an indication that the bear trend in the stock has set in. The stock retested the zone after breaking it from where the stock has fallen steeply.The stock has also broken the listing low at 455 and hence in a very weak position. The rallies in the stock should be used to sell as the stock is in a very weak position.The next good support for the stock is at 352 then 334 and 315. Break of 315 will take the stock all the way to 252.