So, you are aware from long time that Reserve Bank of India (RBI) is going to give new licenses in banking and there are 25 contenders in the fray including L&T Finance Holdings (L&TFH). On Tuesday, the Election Commission gave permission to the Reserve Bank to announce new bank licenses ahead of the general elections set to conclude next month. On that news on Wednesday L&TFH made high of 79.00 with a gap up opening at the start of the bell. So, if you are the one person investing after the news outbreak then yesterday many people might have invested in L&TFH and stocks like IDFC and stuck badly in all probable here after for some time.
L&TFH has huge gap down opening at 70.50 (Previous close 77.25) down by more than 8%. Short term traders hit badly when they see the stock opening. Santosh Singh, BFSI Analyst, Espirito Santo Securities however says there is no sense in buying IDFC and L&T Finance only on the back of talks of new bank licenses. He opines that L&TFH trading at far more premium to IDFC where the book is not that good as IDFC and the challenges for both remain that they will have to build current account savings account (CASA) franchise. There will be huge amount of strain on L&T Finance Holdings’ book and their current return on equity (RoE) which is already fallen below 10 percent and now it will further down with new strains.
If you are a long term investor also look at the L&TFH chart below.
MACD bar started fresh on the downside indicating there may be further low in the near term. Its 13 day EMA crossed downward again after brief stint upside yesterday. Its 2 day Force Index (FI 2) ended up fresh low indicating it may not retrieve quickly although 13 day Force Index (FI 13) may have chances to get diverged. On weekly chart its MACD bars are on upside and if the stock ends up below 66-69 MACD bar may firm up on downside indicating chances of getting this stock at attractive valuations. So, is the reason no one should be after the news while investing for long term and better be alert on chart readings and buying stock at valuation prices.
