Last week, the share price of Kotak Mahindra Bank (NS:) witnessed a sharp decline and it fell by 10.2% to Rs 1,608.5. The main reason for the sharp selling was the RBI directive to restrict banks from engaging and issuing new credit cards through online and mobile banking channels.
Although the bank has not yet got any relief from the instructions, but due to some reasons the sharp cut may now turn into a buying opportunity.
First, the RSI (Daily, 14) showed a reading of 29.55 on Friday, which is below the benchmark oversold reading of 30. Moreover, there is a strong support level around Rs 1,600 which is preventing the stock from falling further in 2021. Since the stock is trading around similar levels, this could now be a potential mean reversion opportunity on the technical front. In fact, protips also indicate the oversold status of a stock as a part of giving all the necessary information an investor needs.
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From a valuation perspective the stock is undervalued. How to know about assessment status? InvestingPro’s Fair Price feature is the best and easiest way. It uses multiple financial models to calculate intrinsic values and then takes the average of all of them to arrive at a more realistic value of the stock. In the case of Kotak Mahindra Bank, its fair value is Rs 1,795.5, which means an upside potential of 10.6%.
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Additionally, if you look at the consensus of analysts covering this counter, they have an average target price of Rs 2,029, which is also higher than fair value. In fact, the lowest target price is Rs 1,622 which is the current price, so the chances of downside from here are quite low.
You can blend the technical and fundamental approaches seen above to further strengthen your investment decisions with the help of InvestingPro. Luckily, InvestingPro is now available at a whopping 69% discount at Rs 216 per month for a very limited time. To receive your offer today click here!
X (formerly, Twitter) – Aayush Khanna
