IndusInd Bank shares jump over 2% after Q2 results. Should you buy, sell or hold? Brokerages weigh in; target price

IndusInd Bank shares rose over 2% on Monday, 26 October, after the private sector lender reported a return to profitability in the September quarter, supported by steady core income growth and an improvement in asset quality. However, a sequential contraction in net interest margin (NIM) and a cautious recovery outlook have left brokerages divided on the stock.

The bank reported a net profit of ₹1,242 crore in Q2 FY27, compared with a net loss of ₹437 crore in the year-ago quarter. Profit after tax rose 20% from ₹1,037 crore in the June quarter.

Net interest income (NII), or the difference between interest earned and interest paid, increased 4% year-on-year to ₹4,569 crore, although it declined 2% sequentially. Net interest margin contracted to 3.23% from 3.35% in the preceding quarter, adjusted for a one-off item, according to the bank's disclosures.

Advances grew 11% quarter-on-quarter, while asset quality improved. The gross non-performing asset (GNPA) ratio declined to 2.73% from 3.25% in the June quarter. Provisions stood at ₹1,223 crore, down 12% sequentially and 54% year-on-year.

IndusInd Bank Managing Director and CEO Rajiv Anand said the bank mobilised $3.51 billion through FCNR(B) deposits during the quarter, which weighed on margins. The bank used part of these funds to replace higher-cost wholesale borrowings and plans to deploy the remaining liquidity towards advances as required.

Anand said the bank's liquidity position remained comfortable to support loan growth. He also expressed confidence that the pressure on margins could be recouped as the share of retail advances increases.

The bank said its wholesale banking business grew 10% sequentially, while retail banking expanded 4%, even excluding advances linked to FCNR(B) deposits. Anand added that the lender did not see stress in its rural banking portfolio despite weather-related challenges, but would remain cautious and calibrated in expanding its microfinance book.

Brokerages remain constructive on the bank's longer-term turnaround, but their recommendations and price targets vary, reflecting differences in expectations for earnings recovery, profitability and valuation.

Nuvama Institutional Equities retained its 'Buy' rating on IndusInd Bank, saying the calibrated turnaround under the new management remained on track. The brokerage believes the strategy of increasing the share of retail assets and liabilities could support healthy long-term risk-adjusted returns on capital.

While a full recovery will take time, Nuvama expects steady improvements in growth and asset quality to drive the bank's return on assets (RoA) towards 0.9–1.4% over FY27–FY29.

The brokerage trimmed its FY28–FY29 earnings estimates, citing the impact of insurance commission capping, and revised its target price to ₹1,200 from ₹1,250, valuing the bank at 1.4 times its estimated adjusted book value for September 2028.

Motilal Oswal Financial Services maintained a 'Neutral' rating on the stock with a target price of ₹1,050, based on 1.1 times its estimated adjusted book value for March 2028.

The brokerage described the September quarter as healthy, supported by steady NII growth and improving business momentum. Return on assets improved to 0.87% from 0.63% in the June quarter, adjusted for a one-off item. The bank continues to target an exit RoA of around 1% by the end of FY27.

Motilal Oswal noted that NIM contracted 12 basis points sequentially to 3.23%, while growth in the commercial banking and mid-market segments supported advances. However, growth in the unsecured retail book remained muted.

The brokerage said strong FCNR(B) deposit mobilisation helped replace higher-cost wholesale funding, taking retail deposits to 50% of total deposits. A broad-based reduction in slippages also supported the improvement in asset quality.

Motilal Oswal raised its earnings estimates by 19% for FY27 and 17% for FY28. It expects RoA to improve to 0.8% in FY27 and 1.1% in FY28, while the bank's loan growth is expected to broadly track industry growth in FY27.

Systematix Institutional Research maintained its 'Hold' rating on IndusInd Bank with an unchanged target price of ₹950.

The brokerage values the standalone bank at one times its estimated FY28 adjusted book value per share of ₹928. Its valuation factors in an expected return on equity (RoE) of 7.2% in FY27, 9.8% in FY28 and 11.1% in FY29.

IndusInd Bank share price today opened at ₹835 apiece on the BSE, the stock touched an intraday high of ₹854.45 per share, and an intraday low of ₹834.10 apiece.

Gaurav Arora, Head of Research at SAHI, said IndusInd Bank shares remained in a clear downtrend, forming lower highs at around ₹1,020 in September, ₹907 in early October and ₹890 in mid-October. The stock was trading below its 20-day exponential moving average (EMA) of around ₹880, while its 63-day moving average of nearly ₹925 had slipped below the 200-day moving average, signalling weakening medium-term momentum.

Arora said holding above ₹835 could trigger a pullback towards ₹880–885, with ₹900 acting as a key resistance level. However, a close below ₹835 could extend the decline towards ₹800, making ₹835 a crucial level to watch in the near term.

Rajesh Bhosale, Technical Analyst at My Advisor Alpha, said IndusInd Bank shares had started moving higher after opening flat. The stock was showing an open-low formation on the daily chart, indicating potential buying interest. He said if the stock sustains above the day's low of ₹832 and moves past ₹855, which coincides with the intraday high and Friday's high, the rebound could extend towards ₹875.

Dhanya Nagasundaram works as a Content Producer at LiveMint, specializing in news related to financial markets, stocks, and business. With over eight years of experience in journalism and content creation, she has honed her skills in data-driven reporting and market analysis. Her focus is on monitoring stock trends, initial public offerings (IPOs), corporate news, policy shifts, and larger economic trends that affect investors and market players. <br><br> At LiveMint, Dhanya consistently writes and produces articles that make complex financial topics accessible to readers. She keeps a close eye on equity markets, commodities, and macroeconomic indicators, assisting audiences in comprehending how global and domestic events influence investment perspectives. Her stories frequently underscore emerging trends within sectors, the IPO market, company earnings results, and market strategies pertinent to both retail and institutional investors. <br><br> Before her tenure at LiveMint, Dhanya accumulated a wealth of professional experience at various companies, including MintGenie, Informist, Cogenics, Chary Publications, KPMG, and the Royal Bank of Scotland. These positions allowed her to establish a solid foundation in financial research, reporting, and content creation. <br><br> Throughout her career, she has explored numerous subjects such as trading strategies, commodities, IPOs, wealth generation, corporate profits, and macroeconomic indicators. Her background in both financial journalism and corporate settings has given her the ability to tackle stories with analytical rigor while ensuring clarity for her audience. Through her contributions, Dhanya strives to deliver insightful, trustworthy, and investor-centric financial content.

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