Punters continue betting on 2 stocks having potential to become 2 baggers in less than 2 years

[ Which horse do you think represents Yes Bank and which represents Indus Ind

Bank and which horse do you think will eventually win the race or will it be a tie ]

IIn order to tame inflation, D Subbarao, Governor of the RBI on Tuesday 2 November 2010, announced a hike of 25 basis points in the repo and reverse repo rates, respectively, in the mid-year review of its credit policy. The cash reserve ratio (CRR), as expected, has been left untouched at 6%. Accordingly, the new repo rate, at which it lends to banks, stands at 6.25% and the reverse repo rate, at which it absorbs extra cash, at 5.25 per cent.

Besides, RBI made other announcements like reduction in Export credit refinance, discontinuing the bank funding support to Mutual Funds, Non Banking Finance Companies and Housing Finance Companies.

Consequent to the above announcements, the Sensex rested at 20345.69, down by 0.05 per cent and 9.96 points lower

The markets seemed to have simply shrugged off the RBI announcement with the Nifty moving sideways and Advance:Decline ratio being 25:25.

Amongst the 6 Nifty bank stocks, most registered an increase in their share prices in the range of 0.05 to 1.35 per cent increase. Kotak Mahindra Bank ended at Rs.474.45, up by 1.35 per cent over previous close.

Amongst all the banking stocks, I find as if there is a race going on between 2 banking stocks with different group of punters striving hard to drive up the stock prices of Yes Bank and Indus Ind Bank. In this calendar year of 2010, Yes Bank has given investors 33 per cent return and Indus Ind Bank has given 100 per cent returns as shown below:

	Yes Bank	Indus Ind Bank
4 Jan 2010	268	142
2 Nov 2010	368	285
Returns %	37.31	100.71

I was always wondering when the above two stocks will stop rising and start sliding downwards but to my surprise the stock use to rise no sooner it use to fall and slowly but gradually it reached levels that give the owners a very good return, especially Indus Ind Bank. So, now you must be wondering why on earth am I penning my thoughts on stocks that have already risen. Well, hold your breath my dear friends. Instinct stronger than reason tells me that both the above stocks can become two baggers in 2 years. Figures speak louder than words and presented below is a snapshot of the some numbers related to these two banks which are in great shape and seem fully geared to keep rewarding its shareholders steadily but handsomely in the years to come.

While the Equity base of Indus Ind Bank is higher than that of Yes Bank by Rs.116 crores, both banks Market Capitalization is more or less same- Yes has a Market Cap of Rs.12753 crores whereas Indus has a Market Cap of Rs.12759. PE of Yes is 21.31 and that of Indus is 29.16. The LTP on 2 November 2010 of Yes Bank was Rs.369.4 and that Indus Ind Bank was Es.276.65.

Further, annual and latest quarter results are provided below for quick reference which will give one a fair idea about how the company is performing on an annual as well as on quarterly basis:

Figures in crores

		YES BANK	INDUS IND BANK
Total Income	FY2009-10	2945	3260
Total Income	FY2008-09	2438	2765
Increase	%	20.79	17.9
PAT	FY2009-10	477	350
PAT	FY2008-09	303	148
Increase	%	57.42	136.48
Total Income	Q2 FY2010-11	1084	505
Total Income	Q2 FY2009-10	678	341
Increase	%	59.88	48.09
PAT	Q2 FY2010-11	176	133
PAT	Q2 FY2009-10	111	77
Increase	%	58.55	72.72

Further, one can get a better perspective about how effective the bank is in conducting its affairs and the potential it has for growing further by looking at the following data:

			YES BANK		INDUS IND BANK
NIM			3		3.41
Capital Adequacy			19.43		16.22
Net NPA's			0.06		0.36
Total Branches			171		238

And as far as CASA is concerned Indus Ind Bank has a CASA of 25.4 per cent and Yes Bank’s CASA is growing at a whopping 118 per cent on a y-o-y basis.

Based on the above data, can you guess which is the better scrip having the potential to double your money in about two years time. If you put on your thinking cap and look at the numbers closely, you know which scrip will double your money. Going forward, I will not be shocked if investor sentiments and punters drive the stock prices to levels that would be tantamount to irrational exuberance!

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd