RBL Bank Ltd Upgraded to Hold by MarketsMOJO Amid Mixed Financials and Bullish Technicals

Quality Assessment: Institutional Confidence Amid Profitability Concerns

RBL Bank operates within the private sector banking industry and currently holds a Mojo Grade of Hold, upgraded from Sell. One of the notable quality factors supporting this upgrade is the high institutional holding at 51.15%. Institutional investors typically possess superior analytical resources and a longer-term perspective, which suggests confidence in the bank’s underlying fundamentals despite recent setbacks.

However, the bank’s financial quality remains under pressure. The company has reported negative financial performance for four consecutive quarters, including Q2 FY25-26. Profit After Tax (PAT) for the nine months ended December 2025 stood at ₹447.55 crores, reflecting a sharp decline of 52.72% year-on-year. Profit Before Tax (PBT) excluding other income was negative at ₹-704.01 crores, down 10.73%. Non-operating income accounted for an outsized 407.84% of PBT, indicating reliance on non-core earnings to offset operational losses.

Return on Assets (ROA) remains subdued at 0.3%, signalling limited profitability relative to asset base. These factors weigh on the bank’s quality grade, tempering enthusiasm despite institutional backing.

Valuation: Premium Pricing Amid Profit Declines

RBL Bank’s valuation metrics present a mixed picture. The stock trades at ₹315.65, up 1.90% on the day, with a 52-week high of ₹331.80 and a low of ₹146.00. The Price to Book Value (P/BV) ratio stands at 1.2, indicating a premium valuation compared to peers’ historical averages. This premium is notable given the bank’s recent profit contraction of 59.3% over the past year.

While the stock’s market capitalisation grade is moderate at 3, the elevated valuation relative to earnings performance suggests investors are pricing in future recovery or growth potential. This valuation premium contributes to the Hold rating, as it reflects cautious optimism balanced against current financial challenges.

Financial Trend: Negative Earnings but Strong Market Returns

Despite the bank’s deteriorating earnings, its stock performance has been robust. Over the last one year, RBL Bank has delivered a remarkable return of 99.78%, significantly outperforming the Sensex’s 9.06% gain over the same period. The bank has also outpaced the BSE500 index over the past three years and three months, with a 75.9% return compared to the index’s 40.07%.

This divergence between financial results and market returns highlights investor optimism about the bank’s long-term prospects or potential turnaround. However, the negative quarterly results and declining profitability metrics remain a cautionary factor, limiting the rating to Hold rather than Buy.

Technicals: Bullish Momentum Drives Upgrade

The primary catalyst for the upgrade from Sell to Hold is the improvement in technical indicators. The technical grade has shifted from mildly bullish to bullish, reflecting stronger momentum in the stock price and positive signals from key technical tools.

On a weekly basis, the Moving Average Convergence Divergence (MACD) remains mildly bearish, but the monthly MACD is bullish. The Relative Strength Index (RSI) shows no clear signal on both weekly and monthly charts, suggesting a neutral momentum in the short term. Bollinger Bands are bullish on both weekly and monthly timeframes, indicating upward price volatility and potential for further gains.

Daily moving averages are bullish, reinforcing the positive trend in the near term. The Know Sure Thing (KST) indicator is mildly bearish weekly but bullish monthly, while Dow Theory signals are mildly bullish across both timeframes. On-Balance Volume (OBV) is mildly bullish weekly and bullish monthly, suggesting accumulation by investors.

These technical improvements have been reflected in the stock’s recent price action, with the current price at ₹315.65, up from the previous close of ₹309.75. The stock’s one-week return of 3.27% also outperforms the Sensex’s slight decline of 0.22% over the same period.

Balancing Act: Why Hold and Not Buy?

The Hold rating reflects a nuanced view of RBL Bank’s outlook. While technical momentum and institutional confidence have improved, the bank’s fundamental financial performance remains weak. The persistent negative earnings trend, low ROA, and reliance on non-operating income to bolster profits are significant concerns.

Valuation remains expensive relative to earnings, suggesting the market is pricing in a recovery that has yet to materialise. Investors should weigh the strong market returns and technical signals against the ongoing financial challenges before increasing exposure.

Conclusion: A Cautious Outlook with Technical Tailwinds

RBL Bank Ltd’s upgrade to Hold from Sell is primarily driven by a marked improvement in technical indicators and sustained institutional interest, despite ongoing financial difficulties. The bank’s stock has delivered market-beating returns over the past year and longer term, reflecting investor optimism.

However, the fundamental financial metrics remain weak, with declining profits, low ROA, and a high valuation premium. These factors justify a cautious stance, with the Hold rating signalling neither a strong buy nor a sell recommendation at this stage.

Investors should monitor upcoming quarterly results and technical trends closely to assess whether the bank can translate its positive momentum into improved financial performance.

Only Rs. 9,999 - Get MojoOne + Stock of the Week for 1 Year (MRP = Rs. 34,999) Start Saving Now →