Bank Of Baroda Upgraded to Buy by MarketsMOJO on Strengthened Fundamentals and Technicals

Quality Assessment: Strong Fundamentals Amidst Flat Quarterly Performance

Despite a flat financial performance in Q3 FY25-26, Bank Of Baroda continues to demonstrate strong lending discipline, evidenced by a low Gross Non-Performing Assets (NPA) ratio of 2.04%. This figure remains well below industry averages for public sector banks, underscoring the bank’s effective risk management and credit appraisal processes. Furthermore, the bank’s long-term fundamental strength is highlighted by an impressive compound annual growth rate (CAGR) of 52.20% in net profits over recent years, signalling consistent operational improvement and profitability expansion.

Return on Assets (ROA) stands at a healthy 1.0%, reflecting efficient utilisation of assets to generate earnings. The bank’s sizeable market capitalisation of ₹1,56,822 crores positions it as the second largest entity in the public sector banking space, accounting for 6.98% of the sector’s total market cap. This scale advantage supports its competitive positioning and ability to leverage economies of scale.

Institutional confidence remains robust, with holdings at 28.65%, having increased by 0.93% over the previous quarter. This rise in institutional stake suggests growing endorsement from sophisticated investors who typically conduct rigorous fundamental analysis before committing capital.

Valuation: Attractive Pricing Amidst Fair Market Comparisons

Bank Of Baroda’s valuation metrics have become increasingly compelling, contributing significantly to the upgrade. The stock currently trades at a Price to Book Value (P/BV) of 1.0, which is considered very attractive for a public sector bank with strong fundamentals. This valuation is in line with the bank’s historical averages and compares favourably against peers, many of which trade at higher multiples despite weaker growth prospects.

While the Price/Earnings to Growth (PEG) ratio is relatively elevated at 8.1, this figure is tempered by the bank’s strong earnings growth trajectory and improving asset quality. The stock’s recent price appreciation has been supported by a 46.29% return over the past year, significantly outperforming the Sensex’s 9.81% return in the same period. Over longer horizons, Bank Of Baroda has delivered a remarkable 260.37% return over five years, dwarfing the Sensex’s 61.40% gain, which further validates the stock’s valuation premium.

Financial Trend: Stable Profitability with Long-Term Growth Momentum

Although the latest quarter showed flat financial results, the bank’s long-term financial trend remains robust. Net profit growth at a CAGR of 52.20% over multiple years highlights sustained operational improvements and effective cost management. Annual sales of ₹1,25,468.55 crores represent 9.80% of the public sector banking industry, reinforcing the bank’s significant market presence.

However, some caution is warranted due to the composition of income. Non-operating income constitutes 54.73% of Profit Before Tax (PBT) in the quarter, indicating reliance on non-core activities which may not be sustainable. Additionally, cash and cash equivalents at ₹49,950.13 crores are at a low point, which could impact liquidity buffers if not replenished.

Despite these concerns, the bank’s strong lending practices and low Gross NPA ratio provide a solid foundation for future earnings stability and growth.

Technicals: Bullish Momentum Drives Upgrade

The most significant catalyst for the rating upgrade is the marked improvement in technical indicators. The technical grade has shifted from mildly bullish to bullish, reflecting stronger momentum and positive price action. Key technical signals include:

• MACD: Weekly remains mildly bearish, but monthly readings are bullish, indicating longer-term upward momentum.
• RSI: Both weekly and monthly charts show no extreme signals, suggesting room for further price appreciation without overbought conditions.
• Bollinger Bands: Bullish on both weekly and monthly timeframes, signalling price strength and potential breakout continuation.
• Moving Averages: Daily moving averages are bullish, supporting near-term upward trends.
• KST (Know Sure Thing): Weekly mildly bearish but monthly bullish, aligning with other momentum indicators.
• Dow Theory: Weekly mildly bullish, though monthly mildly bearish, indicating some mixed signals but overall positive near-term outlook.
• On-Balance Volume (OBV): Weekly shows no clear trend, but monthly is mildly bullish, suggesting accumulation by investors over time.

Price action confirms this technical strength, with the stock closing at ₹303.25 on 18 Feb 2026, up 3.66% from the previous close of ₹292.55. The stock is trading near its 52-week high of ₹313.30, well above the 52-week low of ₹190.70, demonstrating strong recovery and momentum.

Market Performance: Outperforming Benchmarks Across Timeframes

Bank Of Baroda’s market returns have consistently outpaced benchmarks, reinforcing the rationale behind the upgrade. Over the past week, the stock surged 4.39%, contrasting with the Sensex’s decline of 0.98%. Year-to-date, the stock has gained 2.50%, while the Sensex fell 2.08%. The one-year return of 46.29% far exceeds the Sensex’s 9.81%, and the three-year return of 81.86% is more than double the Sensex’s 36.80%. Even over five years, the stock’s 260.37% return dwarfs the Sensex’s 61.40% gain.

These figures highlight the bank’s ability to generate superior shareholder value over multiple time horizons, supported by strong fundamentals and improving technicals.

Risks and Considerations

Despite the positive outlook, investors should remain mindful of certain risks. The flat quarterly results in December 2025 indicate potential near-term earnings pressure. The relatively high proportion of non-operating income to PBT (54.73%) raises questions about the sustainability of profit sources. Additionally, the low cash and cash equivalents balance may constrain liquidity in volatile market conditions.

Moreover, some technical indicators present mixed signals, such as the weekly MACD and KST being mildly bearish, which could temper short-term momentum. Investors should monitor these factors closely alongside broader macroeconomic developments affecting the banking sector.

Conclusion: Upgrade Reflects Balanced Optimism

The upgrade of Bank Of Baroda’s rating from Hold to Buy is a reflection of its improving technical momentum combined with solid long-term fundamentals and attractive valuation. While the recent quarter’s flat performance and certain financial risks warrant caution, the bank’s strong lending quality, institutional backing, and market-beating returns provide a compelling investment case.

With a Mojo Score of 75.0 and a Buy grade, the bank is well positioned to capitalise on favourable market conditions and sector growth. Investors seeking exposure to a leading public sector bank with a proven track record of growth and improving technicals may find this an opportune moment to consider adding Bank Of Baroda to their portfolios.

Upgrade at special rates, valid only for the next few days. Claim Your Special Rate →