Why Yes Bank Shares Cracked 10% In Trade Today?

Shares of Yes Bank are probably the most volatile shares one can buy and a traders delight. The stock has been all over the place in the last many months on funding plans, quarterly numbers and downgrade of ratings.

Today, the shares crashed 10 per cent to Rs 56, after Moody's downgraded the bank's long-term foreign currency issuer rating to B2 from Ba3.

"The outlook on the bank's ratings, where applicable, is negative," Moody's said in a statement.

"Yes Bank's funding and liquidity compares weakly to other rated private sector peers in India, and could come under pressure, if the bank cannot strengthen its solvency in the next few quarters," it further added.

Recently the stock fell after reports the bank had disclosed funding plans to the tune of $2 billion. On the day of the announcement the shares fell after investors were unhappy that there were no marquee investors in the fund raising plans.

Should you buy the Yes Bank shares now?

This is one question that no analyst would want to answer. The non performing asset woes are very likely to continue into the next few quarters. This means the company would largely remain dependent on raising capital, but, here again the question remains on the price at which the amount is raised. Every incident of capital raising will lead to equity dilution, which in turn could have a negative impact on the stock.

A lot of investors have got trapped in the stock at higher levels and volatility in the shares is compounding the woes. With economic growth continuing to head lower, a quick recovery in the shares from current levels looks ruled out.

As things stand one is not sure which way the stock would go. For those investors who have an appetite for risk, this could be the right stock. On our part we would not likely to make either a "buy" or a "sell" call on the stock. At the moment it is more of a "neutral" call.