As the Yes Bank share price pops, is it a good buy?

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Written on Sep 4, 2023

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Yes Bank stock price has staged a strong rebound in the past few days.
The shares rose after the company reached a deal with JC Flowers.
The company is implementing a turnaround as India’s recovery continues.

Yes Bank (NSE: YESBANK) share price continued its remarkable comeback on Monday. The stock jumped to a high of ₹18.95, the highest level since January 2020. It has soared by more than 29% from the lowest level this year, making it one of the best-performing bank stocks in India.

Why did Yes stock rise?

Yes Bank is a mid-cap bank that came on the verge of collapse during the Covid-19 pandemic. At the time, the Reserve Bank of India (RBI) intervened by forcing other large banks to take a stake in the company.

The bank also took measures to boost its balance sheet. It took in capital from Carlyle Group and Advent International, two of the biggest players in the private equity industry globally. It also raised capital by selling shares to investors earlier this year.

In addition, Yes Bank created a bad bank and sold it to JC Flowers, a company that specializes in distressed loans. All these measures, coupled with India’s economic performance, have made the company more profitable as the management implements the turnaround.

Results published last month revealed that its profit rose by 10.3% YoY in the first quarter to Rs 342.5 crore. That figure was higher than the Rs 263 million that analysts were expecting. Its advances grew by 7.4% while total deposits jumped by 13.5%.

The main reason for the Yes Bank share price resurgence is that the company resolved a dispute with JC Flowers. In a move that has been criticized widely by Indians, the company agreed to receive Rs 1,500 crore from Subhash Chandra instead of Rs 6,500 crore.

Yes Bank chart by TradingView

The daily chart shows that the Yes Bank stock price has been in a bullish trend in the past few months. It has formed an ascending channel shown in black. The price moved to a high of Rs 18.90, the upper side of the channel. It is also the highest point on March 3rd.

The stock has moved above the 25-day and 50-day moving averages. At the same time, the Relative Strength Index (RSI) and the MACD have drifted upwards.

Therefore, with the stock sitting at an important resistance level, the outlook for the shares is neutral. A move above the resistance at Rs 19.10 will point to more gains, with the key resistance being at Rs 20.50. The alternative scenario is where the shares drop to the support at Rs 17, the lower side of the chart.