Can IndusInd Bank maintain its momentum following Nomura's upgrade?

Synopsis

IndusInd Bank's stock witnessed a significant rise. This followed an upgrade by Nomura from 'Neutral' to 'Buy'. The upgrade comes after the bank faced accounting discrepancies. Nomura's target price suggests a substantial upside. The firm acknowledged the bank's commitment to improved governance. RBI's recognition of recovery efforts also boosted confidence.

Mumbai: Shares of IndusInd Bank surged 4.7% on Wednesday after brokerage Nomura upgraded the stock to a 'Buy' from 'Neutral'- marking one of the first upgrades following the recent accounting fiasco that led to top-level exits.

The firm set a price target of ₹1,050, implying a 24% upside from Wednesday's close at ₹847.

"The commitment from the board to improve governance, the ongoing search for a new leadership, and the clear intent to 'start FY26 on a clean slate' are crucial positive signs," said Nomura. The recent remarks from RBI acknowledging the bank's recovery efforts also offer "a degree of regulatory comfort."

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The brokerage said potential approval for the Hinduja Group (via IIHL) to raise its stake in the bank could help ease investor concerns.

In March, IndusInd Bank disclosed ₹1,979 crore in derivative-related losses stemming from internal trades and accounting discrepancies. Subsequently, the lender's CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned.

Nomura said the bank has since undertaken a significant clean-up of its books, absorbing a one-time hit of ₹5,300 crore (8% of net worth) in the March quarter to address legacy issues.

"We compare IIB's scenario to RBL (2021) and Yes Bank (2018), where leadership exits were followed by medium-term recoveries as fundamentals improved," the note said.

The stock has recovered from its recent low of ₹605.4, but is still down over 12% so far in 2025.

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