Yes Bank Surges 1480% Since March 6: Will The Rally Sustain?

The relentless rally in Yes Bank shares continues ever since the SBI led consortium came at the rescue of the beleaguered lender. After the moratorium was announced for the bank, the stock on March 6 hit an all-time low of Rs. 5.55 per share, but since then has been on a winning streak and has surged as much as 1480% in a matter of just 9 trading sessions. This is taking into account the surge in the stock on March 18, 2020 of almost 50% to day's high of Rs. 87.95 on the BSE.

Yes Bank Surges 1480% Since March 6: Will The Rally Sustain?

One view on the surge is that as the clearing houses have not delivered the shares bought in by the traders or investors on March 12 and March 13 or for that matter also on March 16 to their demat account. There is less of volume available for trading in the stock which is to an extent responsible for the sharp spurt in the stock price of Yes Bank.

Despite the Lock-In Investors Who Had Taken Positions In the Yes Bank Scrip At Its Lowest Price Would Have Made Money

When the stock hit an all-time low of Rs. 5.55 per share, those who would have taken positions in the stock would have easily made money despite the lock-in of 3 years for shareholders with over 100 shares. Say, when an investor A bought 1000 shares of Yes Bank on March 6 when it hit its lowest of Rs. 5.55 per share and would have been paid between Rs. 6- Rs. 15 per share, he would have incurred as much as Rs. 15000 on the purchase.

But now given the lock-in in the current market scenario, when the stock is rallying, he could still sell 250 shares and make as much as 250 * Rs. 75 (LTP)=Rs. 18,750, which is way higher than what he paid for purchasing 1000 shares.

Will The Rally Sustain In Yes Bank Scrip?

The attempts made at restoring the confidence of investors, traders and depositor community in the bank is for the moment causing the sucker rally in the stock. Sucker rally is basically driven by investors' appetite for betting on the stock at falling rates and is generally seen when the overall market is witnessing a sharp downtrend.

Also, some hint at a possible speculation in the stock and in a matter of time this rally may reverse.

And as pointed as there is a decline in the free float of the scrip by as much as 75%, going ahead there shall be wild swings in the stock based on development so investors and traders need to exercise extreme caution. This is because there is a relationship between free float of the scrip and volatility. In a general trend, a large free float means that the stock's volatility was lower because there are more traders trading in the stock. And similarly lower free float indicates more volatility since fewer trades results in significant price swings.

Also, as and when the moratorium gets lifted today at 6pm much would be known thereafter as how many customers still wish to continue with the bank.

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