Investing 12-01-2023 09:01 22 Views

Yes Bank share price is plunging: Is there an end in sight?

Yes Bank (NSE: YESBANK) share price has plunged as the momentum it had in December faded. The stock plunged to a low of ₹20, which was the lowest point since December 29. It has plunged by more than 12% from the highest point in 2023 and by about 20% from its December high. This means that the stock has moved to a bear market.

Why is Yes Bank slumping?

Yes Bank has made a strong recovery in the past few years. Its stock price surged by more than 60%, making it a better performer than other popular Indian banks like HDFC, SBI, and ICICI. This was a strong comeback for a bank that was on the verge of collapse a few years ago. 

For starters, Yes Bank is a relatively small and young financial services company. It was established in 2004 by Rana Kapoor and Ashok Kapoor and has over $36 billion in assets. The company was caught in a major financial crisis in 2020 that saw it come under the radar of the Reserve Bank of India (RBI).

Since then, the company has been in a recovery and restructuring mode. In December, the company said that it had secured an investment from leading Wall Street private equity companies: Carlyle and Advent. It also announced that it would create a bad bank and sell it to JC Flowers, another restructuring specialist. All these measures explain why the Yes Bank share price surged in 2022.

Yes Bank stock has plunged in 2023 as enthusiasm about these announcements faded. The company also announced relatively strong financial results. Its advances rose to ₹196,825 crore in the third quarter up by 12% from the same period in 2023. 

Its deposits also rose to ₹213,608 crore in the quarter while its credit-to-deposit ratio dropped to 89.7%. However, profitability was a challenge, as net profit dropped by 32% to ₹153 crore. This happened as provisions for bad debt rose while net interest income rose by 11%.

Yes Bank share price forecast

The daily chart shows that the Yes Bank stock price has dropped in seven straight days and is now at the lowest point since December 29. The shares remain above the 200-day and 50-day moving averages. A closer look shows that it has formed what looks like a double-top pattern, whose neckline is at ₹17.20. 

A double-top pattern is usually a bearish sign. Therefore, I suspect that the shares will continue falling as sellers target the key support at ₹18.20, the highest point in September. A drop below that level will see it crash to a low of ₹16.50, which is along the 200-day MA.

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