Bandhan Bank Upgraded to Hold as Technicals and Valuation Improve Amid Mixed Financials

Technical Trends Shift to Mildly Bullish

The primary catalyst for the upgrade lies in the bank’s technical profile, which has transitioned from a sideways trend to a mildly bullish one. Weekly and monthly MACD indicators both suggest a mild bullish momentum, supported by the KST (Know Sure Thing) indicator and Dow Theory signals on weekly and monthly charts. The On-Balance Volume (OBV) also reflects mild bullishness, indicating that buying pressure is gradually increasing.

However, not all technical signals are unequivocally positive. The Relative Strength Index (RSI) on both weekly and monthly timeframes remains neutral, offering no clear directional signal. Bollinger Bands present a mixed picture with weekly data bullish but monthly data mildly bearish. Daily moving averages are mildly bearish, suggesting some short-term caution.

Overall, the technical landscape has improved sufficiently to warrant a more positive outlook, moving the technical grade from neutral to mildly bullish, which played a significant role in the rating upgrade.

Valuation Moves from Expensive to Fair

Bandhan Bank’s valuation grade has improved notably, shifting from expensive to fair. The current price-to-earnings (PE) ratio stands at 25.16, which, while elevated relative to some peers, is justified by the bank’s return on equity (ROE) of 4.10% and return on assets (ROA) of 0.52%. The price-to-book (P/B) ratio is a modest 1.03, indicating that the stock is trading close to its book value, a factor that supports the fair valuation assessment.

Dividend yield remains low at 0.95%, reflecting the bank’s focus on reinvestment and capital adequacy rather than shareholder payouts. The net non-performing assets (NPA) to book value ratio is 5.70%, a figure that warrants monitoring but is not alarming within the private sector banking context.

Compared to peers such as Karur Vysya Bank (very expensive at PE 13.33 but with different fundamentals) and RBL Bank (expensive at PE 28.47), Bandhan Bank’s valuation appears more balanced. This relative attractiveness has contributed to the upgrade in valuation grade, signalling a more reasonable entry point for investors.

Financial Trend Remains Challenging

Despite improvements in technicals and valuation, Bandhan Bank’s financial trend continues to show signs of strain. The bank reported negative financial performance in Q3 FY25-26, with net profit after tax (PAT) falling by 33.0% to ₹205.59 crores compared to the previous four-quarter average. Profit before tax excluding other income (PBT less OI) declined by 10.7% to a loss of ₹400.63 crores.

Over the past year, the stock has generated a modest return of 4.00%, underperforming the Sensex’s 6.66% gain. Longer-term returns are less favourable, with a three-year return of -30.91% against the Sensex’s 37.76% and a five-year return of -54.58% versus the Sensex’s 65.60%. This reflects the bank’s struggles with sustained profitability and growth.

Net interest margin remains a bright spot at 7.66%, indicating efficient core banking operations. The capital adequacy ratio is robust at 16.84%, providing a strong buffer against credit risks. However, the bank’s net profit has contracted at an annualised rate of -17.40%, highlighting ongoing challenges in growth and earnings quality.

Technical and Market Price Movements

Bandhan Bank’s stock price closed at ₹157.35 on 5 February 2026, up 1.52% from the previous close of ₹155.00. The day’s trading range was ₹152.10 to ₹158.25, with a 52-week high of ₹192.45 and a low of ₹128.15. Short-term returns have been positive, with a one-week gain of 2.64% and a one-month gain of 8.82%, outperforming the Sensex over the same periods.

These price movements align with the improved technical indicators and suggest growing investor interest, although the stock remains below its 52-week peak, reflecting caution amid mixed fundamentals.

Promoter Confidence Shows Signs of Erosion

Another factor tempering enthusiasm is the reduction in promoter holdings. Promoters have decreased their stake by 0.55% over the previous quarter, now holding 39.74% of the company. This decline may indicate reduced confidence in the bank’s near-term prospects and could weigh on investor sentiment if the trend continues.

Summary and Outlook

Bandhan Bank’s upgrade from Sell to Hold reflects a balanced reassessment of its investment merits. The improved technical indicators and fairer valuation metrics provide a foundation for cautious optimism. However, the bank’s financial performance remains under pressure, with declining profits and subdued long-term returns relative to the broader market.

Investors should weigh the bank’s strong capital adequacy and net interest margin against the risks posed by recent earnings volatility and promoter stake reduction. The Hold rating suggests that while the stock is no longer a clear sell, it does not yet warrant a Buy recommendation until financial trends show sustained improvement.

Market participants will be closely watching upcoming quarterly results and any strategic initiatives by management to restore growth and profitability. For now, Bandhan Bank remains a stock to monitor with a neutral stance, reflecting its mixed fundamentals and evolving technical outlook.

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