Shares of SBI Cards rallied today after broking firm Macquarie named it as a pick, helping the stock to a three-month high, following a high-profile listing in March that was upset by the coronavirus outbreak.

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Macquarie said it was naming SBI Cards, the country’s second-largest credit-cards player, as its top pick now that it has a better view on the impact of COVID-19, and said the stock could climb about 27 percent from current levels.

SBI Cards launched a much-anticipated IPO in February around the time the market was at an all-time high. By the time the stock got listed on March 16, the coronavirus outbreak had caused a sharp meltdown, leading the stock to list at a discount compared to its issue price of Rs 750.

The stock then fell to a low of nearly Rs 500 in early April before bouncing back. It closed today at Rs 709, still 5 percent off its issue price.

Macquarie said that surveys indicate that white-collar job losses in India are not as bad as previously thought.

This is evident in the number of people opting for the RBI-mandated moratorium, or breather on repayments, which has been going down. Besides, credit card users have resorted to lower incremental spending in order to tide over the economic uncertainty induced by the pandemic.

Macquarie said after it had cut projected spends on SBI’s credit cards by 22 percent as also fee income but assumes that the company will benefit from lower operating and credit costs.

“We raise FY21/22 earnings per share

The stock has also been helped by the fact that its recent bounceback has catapulted it in various indexes.

On July 2, it replaced HDFC Life Insurance on the Nifty Next 50. Recently, it has also been added to Nifty500, Nifty100, Nifty Large Midcap250 and Nifty200.

First Published:Jul 7, 2020 8:26 PM IST