Stock in Focus: IDFC on the verge to give a multi-year breakout?

For almost 13 years now IDFC is moving in a downward channel. However, is it on a verge of giving a multi-year breakout? Let’s find out.

IDFC Ltd is yet to release its Q2 FY22 results. But in Q1 FY22, IDFC Ltd posted a total income of Rs 111.6 crore as against Rs 104 crore in the same quarter last year, depicting a growth of around 7% on a consolidated basis. However, it posted a net loss of Rs -410.3 crore as against Rs -26.3 crores in Q1 FY21. Whereas in Q4 FY21, it posted a net profit of Rs 41.1 crores.

IDFC Ltd is a Non-Banking Finance Company (NBFC) that operates as an Infrastructure Finance Company. This means that its core business is financing infrastructure projects in sectors such as energy, telecom, logistics, commercial and industrial projects including hospital, education, and tourism. However, in April 2014, it received approval from the Reserve Bank of India (RBI) to set up a private sector bank. Therefore, from October 1, 2015, they are operating as an NBFC - Investment Company.

As for the stock performance, it is moving in a downward channel for the past 13 years. Presently, it is trading near the upper trendline of the channel. Even the volume seems to be elevated. When it got listed in 2005, it was in a good rally up to 2007. In this period, it generated around 442% on an absolute basis. However, ever since the Great Financial Crises struck in 2008, this stock has been trading downwards in a range-bound fashion.

Looking at the Relative Strength Index (RSI) which is hovering around 61 levels, already gave a multi-year breakout on monthly basis. Also, RSI is trading above its 20-Month Exponential Moving Average (EMA) of 55. This shows strength in the up move of the stock. On the flip side, the Rate of Change (ROC) seems to be declining since February 2021.

So, is IDFC limited likely to give a multi-year breakout? Need to wait and watch for time being. However, with increased volumes and sideways consolidation since March 2021, the stock is indeed gathering strength.