ICICI Bank Upgraded to Hold by MarketsMOJO on Technical and Fundamental Grounds

Technical Trends Shift to Mildly Bearish but Improving

The primary catalyst for the rating upgrade lies in the technical assessment, which has shifted from a bearish to a mildly bearish stance. Weekly technical indicators such as the Moving Average Convergence Divergence (MACD) and the Know Sure Thing (KST) oscillator have turned mildly bullish, signalling a potential stabilisation in price momentum. The weekly Bollinger Bands also reflect a bullish trend, suggesting that the stock price is trading near the upper band, indicative of positive momentum in the short term.

Conversely, monthly technical indicators remain mildly bearish, with MACD and KST both signalling caution. The Relative Strength Index (RSI) on both weekly and monthly charts shows no definitive signal, implying a neutral momentum without overbought or oversold conditions. Daily moving averages remain mildly bearish, reflecting some near-term resistance. The On-Balance Volume (OBV) indicator is mildly bearish on a weekly basis and shows no clear trend monthly, indicating subdued volume support for price movements.

Overall, the technical picture suggests a transition phase where short-term bullish signals are emerging, but longer-term caution remains warranted. This nuanced technical improvement has been a key factor in the upgrade to a Hold rating.

Fundamental Quality Remains Robust Despite Flat Quarterly Performance

ICICI Bank’s fundamental quality continues to impress, underpinning the Hold rating. The bank reported flat financial performance in Q3 FY25-26, with Profit Before Tax (PBT) excluding other income falling by 15.9% compared to the previous four-quarter average, and Profit After Tax (PAT) declining by 8.6%. Cash and cash equivalents also dipped to ₹63,668.79 crores, the lowest in recent periods. Despite these short-term setbacks, the bank’s long-term fundamentals remain strong.

The bank boasts an average Return on Assets (ROA) of 2.16%, a figure that reflects efficient asset utilisation relative to peers. Net profit has grown at an impressive annual rate of 30.41%, signalling healthy earnings momentum over the medium term. The Capital Adequacy Ratio (CAR) stands at a robust 15.03%, well above regulatory minimums, indicating strong buffers against credit and operational risks. These metrics highlight ICICI Bank’s resilience and capacity to absorb shocks while maintaining growth.

Valuation Metrics Indicate Fair Pricing Relative to Peers

ICICI Bank’s valuation remains fair and in line with its fundamental quality. The Price to Book Value (P/BV) ratio stands at 3.1, which is reasonable given the bank’s return on assets of 2.2%. This valuation is consistent with historical averages for the sector and suggests that the stock is neither significantly overvalued nor undervalued. The Price/Earnings to Growth (PEG) ratio of 3 indicates that the stock’s price is somewhat premium relative to its earnings growth, but this is balanced by the bank’s strong capital position and growth prospects.

Trading at ₹1,406.65, the stock is positioned comfortably between its 52-week low of ₹1,200.20 and high of ₹1,494.10, reflecting a stable price range. The recent day change of +0.75% further supports a mild positive sentiment among investors. Institutional holdings remain high at 90.87%, signalling confidence from sophisticated investors who typically conduct rigorous fundamental analysis.

Financial Trend and Market Performance Outperform Benchmarks

ICICI Bank has demonstrated market-beating returns over multiple time horizons. The stock has delivered a 10.53% return over the past year, outperforming the Sensex’s 7.07% gain during the same period. Over three years, the stock’s return of 64.80% significantly exceeds the Sensex’s 38.13%, and over ten years, the bank has generated a remarkable 639.63% return compared to the Sensex’s 239.52%. This long-term outperformance underscores the bank’s ability to generate shareholder value consistently.

Sales of ₹1,69,101.50 crores represent 18.06% of the private sector banking industry, while the bank’s market capitalisation of ₹10,06,259 crores makes it the second largest in the sector, behind only HDFC Bank. ICICI Bank accounts for 26.37% of the sector’s market cap, highlighting its significant influence and scale within the industry.

Summary and Outlook

The upgrade of ICICI Bank Ltd. from Sell to Hold reflects a balanced assessment of its current position. While the bank’s recent quarterly results were flat, the strong long-term fundamentals, including a high capital adequacy ratio, solid return on assets, and robust profit growth, provide a stable foundation. The technical indicators suggest a tentative shift towards positive momentum, although some monthly signals remain cautious.

Valuation metrics indicate the stock is fairly priced relative to its peers, supported by high institutional ownership and consistent market outperformance. Investors should monitor upcoming quarterly results and technical developments closely, as further improvements could warrant a more bullish stance. For now, the Hold rating recognises the bank’s resilience and growth potential while acknowledging near-term uncertainties.

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