Rakesh Jhunjhunwala stock: Federal Bank shares may rally 13% soon; derivatives, quantitative outlook strong

Rakesh Jhunjhunwala-owned Federal Bank stock could be gearing up for a 13% rally in just three months, analysts at ICICI Direct said in a report. The brokerage firm has picked the banking sector stock as their quant pick, backed by derivative and quantitative data. Federal Bank’s share price is up 26% so far this year to now trade at Rs 110 per share, outperforming the benchmark indices. Analysts expect the stock to surge to a target of Rs 124 per share. The stock is part of Big Bull Rakesh Jhunjhunwala’s portfolio, owning 7.57 crore equity shares of Federal Bank along with his wife Rekha Jhunjhunwala.

ICICI Direct noted that banking and financial stocks are witnessing a strong recovery and were the major drivers in the recent up move seen in the Nifty. Although consolidation could be on the cards for Nifty but sectoral heavyweights, select private banks, especially Federal Bank, is likely to do well, according to ICICI Direct. 

“With fresh longs, the stock was able to surpass its intermediate hurdle and Call base of Rs 100 post its quarterly results. We believe with short positions out of the system and accumulation of fresh longs, there should be a further swift up move in the stock,” analysts noted. Federal Bank share price has been resilient this year and in particular, in recent weeks, soaring 18% in July alone.

On the options front, Federal Bank has the highest Call open interest (OI) at 110 strike for the current monthly F&O series. As the stock is above those levels, closure is visible across Call strikes. “With initial signs of closure among Call writers, we expect the stock to outperform the indices throughout the august series. On the other hand, writing is visible in 105, 100 Put strikes that should act as support on downsides,” the report said.

Further, the delivery has also been supportive of the stock helping Federal Bank cross 100 levels. “We believe this accumulation will maintain positive momentum in the stock above said levels. The delivery Z-Score has again started to move into the positive territory since last month as the stock is witnessing fresh accumulation in the delivery segment,” analysts added. ICICI Direct sees a three-month time frame for this stock with a stop loss at Rs 97.8 per share.

Rakesh Jhunjhunwala and Rekha Jhunjhunwala own 7,57,21,060 equity shares of Federal Bank or a 3.64% stake in the lender. The value of the big bull’s stake in the company stands at Rs 832.9 crore on Wednesday morning.