Bank Of Baroda: Has To Sustain Over 140-145 Zone For Further Rally

Consecutive closing (3 days) above 140-145 zone, 

BOB may further rally (dead cat bounce ?) towards 162-182;

Otherwise it may again fall towards 118-110 area

Q3FY16 EPS at (-) 14.50 and it may take another 12 months 

for the bank to return to break even with Q2FY16 EPS (TTM) at 15.89

even if we presumed that "all is fine" with BOB after full disclosure of RBI-AQR

CMP: 139

Sell either below 140-145 or on rise around 152-162;

TGT: 129-118*-102-93-85-78 (1-12M)

TSL> 167

Note: Consecutive closing above 167 for any reason, BOB may further rally towards 182*-191 and 207-216-230 area in the mid to long term (alternative bullish case scenario from the present level).

As we all know, BOB posted a horror Q3 result on last Saturday and reported a loss around Rs.3342 cr (after adjusting tax write back of Rs.1118 cr). This loss is the highest ever quarterly loss for any lender in the history of Indian Banking system.

This loss was driven by 225% surge (YOY) in the Q3FY16 provisions to Rs.6164 cr from Rs.1891 cr; thanks to the RBI-AQR.

But the stock zoomed by almost 20% on Monday to 142 from intraday opening low of  118 on the back of some positive commentary from the BOB management, hopes of some banking sector reforms in the forthcoming budget and RBI Gov's soft stance on further AQR.

Analysts were also positive for the fact that BOB has cleaned/disclosed all its stressed assets in the Q3 itself, rather than spreading it over Q4 (as all other banks are doing).

But some analysts are also skeptical about BOB, because its provision coverage ratio (PCR) is declining steadily on QOQ basis (from 65-58-52.7% in the last three quarters). This is an indication that the bank may have to take more provisions in the months ahead. That may hurt profits and there will be limited PAT growth in FY-17.

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