Yes Bank share price sell-off eases but March 3 will be pivotal

Yes Bank (NSE: YESBANK) share price is in a deep bear market as concerns about the company continue. After spiking to a multi-year high of ₹24.75 in 2022, the stock has plunged by ~32%, making it one of the top underperforming Indian bank stocks. And now, analysts are cautioning that the situation could get worse on March 3.

Lock-up period expires soon

March 3 will be an important date for Yes Bank as the three-year lock-up period will expire. For starters, Yes Bank nearly went bankrupt in 2020 as the Covid-19 pandemic was starting. To deal with the situation, the Reserve Bank of India (RBI) intervened and took control of the bank. 

At the same time, several Indian banks, including Kotak Mahindra, HDFC, and ICICI decided to take a stake into the bank. The caveat was that they were not allowed to sell their holdings for three years. Now, these three years will end on March 3.

In most periods, especially in the United States, the end of a lock-up period is characterized by increased volatility in the market. It also leads to a major sell-off as locked shareholders exit their positions. As such, several Indian analysts caution that Yes Bank shares could see elevated volatility in the next few days.

However, the expiry of the lock-up period does not mean that the stock will crash automatically. In fact, we could see the opposite happen for two main reasons. First, the expiry has already been priced in, which explains why the stock has plunged in the past few months.

Second, there is a concept known as buy the rumor, sell the news. In this case, investors have sold the stock, meaning that they will likely buy it after the period ends.

Yes Bank fundamentals are supportive

Meanwhile, another reason why the Yes Bank share price could rebound in the long term is that its fundamentals seem supportive. From a macro level, the bank will benefit from the ongoing recovery of the Indian economy. Deloitte expects that the Indian economy will expand by almost 7% in 2023, faster than key countries like China and the US. Indian banks, including Yes Bank could benefit.

Further, the bank is implementing a turnaround that includes fresh capital from Carlyle and Advent. It has also shed its toxic loans to J.C Flower. And while the company could lose money this year, analysts see it as a good turnaround story.

YES Bank chart by TradingView

My last YES Bank forecast was accurate as the shares crashed below the target at 18.20 INR. From a technical perspective, we see that the stock has moved below the neckline of the double-top pattern at 17.30 INR. It also flipped the support at 18.20 INR into a support and crossed the 50-day and 200-day moving averages.

Therefore, the short-term outlook is where the stock plunges to the support at 15.30 (September 30 and November 1 low). It will then resume the bullish trend unless there are enough sellers to push it below the support at 15.30 INR.