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The Nifty Bank index today fell 2.1 per cent in the intraday trade, to hit a low of 50,440.6 level on the NSE
The Nifty Bank index today fell 2.1 per cent in the intraday trade, to hit a low of 50,440.6 level on the NSE
Bank stocks, especially public sector banks, were in a freefall on Friday. The Nifty Bank index today fell 2.1 per cent in the intraday trade, to hit a low of 50,440.6 level on the NSE (National Stock Exchange).
The index was pressured by IndusInd Bank, AU Small Finance Bank, Canara Bank, Punjab National Bank, and IDFC First Bank. Barring IndusInd Bank’s 20-per cent plunge, all other shares were down in the range of 4 per cent to 6 per cent.
That apart, ICICI Bank, HDFC Bank, Federal Bank, State Bank of India, and Bank of Baroda were down up to 2.6 per cent at 12:30 PM. By comparison, the Nifty Bank index was trading with 1.8-per cent dip and the Nifty50 was down 1.14 per cent.
The Nifty Private Bank index, on its part, declined 1.8 per cent intraday.
IndusInd Bank Stock Crashes 18%
IndusInd Bank’s Q2 results, as per analysts, were a all-round miss as loan growth moderated, net interest income (NII) declined sequentially, slippages jumped and credit cost increased. Analysts said despite accounting for one-time provisions, profit by the private lender fell short of the consensus estimate.
IndusInd Bank’s Q2 results were characterised by higher provisions, lower other income, and slower growth in higher-yielding loan growth, MOFSL said.
Deposit growth was healthy due to term deposits but NIM contracted sharply amid the rising cost and slower growth in higher-yielding assets, MOFSL said.
“IIB had previously guided for loan growth of 18-22% for FY25. However, with the bank’s cautious view on unsecured growth, we estimate loan growth at 13 per cent. While the MF and Card businesses may continue to report some stress in the near term, overall slippages are likely to remain in control and help maintain broadly stable asset quality,” MOFSL said while cutting its earnings estimates by 16.7 per cent/8.7per cent for FY25/26. It suggested a ‘Buy’ rating with a target of Rs 1,500.
Key factors to monitor going ahead will include improvements in asset quality, control over slippages, and a recovery in NIM. The bank’s management will need to outline a clear strategy to address these challenges and drive future performance, analysts said.
Why are bank stocks falling today?
FPI, FII selling
Thus far in October, FIIs have dumped Indian equities worth Rs 98,086 crore, as per NSDL data. During the same period, domestic institutional investors (DII) have made net purchases of Rs 92,932 crore. NSDL data shows that the Financial Services sector saw the highest FPI outflows between October 1 to 15, totalling up to Rs 23,283 crore.
Previously, FPIs had bought Financial Services shares worth Rs 27,200 crore in September; saw outflows of Rs 12,008 crore in August and Rs 7,648 crore in July.
Spike in bond yields
That apart, a spike in US Treasuries, spilling over to Indian bond yields, has also dampened sentiment across the banking pack. A spike in bond yields negatively affects banks’ securities’ portfolio as it erodes the market value of the bond portfolio held by them.
US Treasury yields touched their highest levels in three-months on Wednesday as the bond market analyse the US Federal Reserve’s next rate cut move, and amid the November US Presidential election.
Yields for the benchmark 10-year US Treasury note hit their highest level since July 25, hitting 4.26 per cent during the day on Wednesday, while the 2-year government bond yield climbed to its highest level since August 19 at 4.07 per cent. Higher yields suggest bond markets now anticipate higher interest rates in coming years than they did before the Fed lowered its rate last month.
Back home, 10-year government bond yields are up 1.7 per cent today, hitting a high of 6.94 per cent during the day. Thus far in October, bond yields are up 1.1 per cent.
Banking Sector Growth Concerns
Fundamentally, the banking sector’s non-food credit growth moderated to 13.6 per cent Y-o-Y in August 2024 vs 13.7 per cent Y-o-Y in July 2024, led by slowdown across all key
sectors.
Going forward, analysts at IDBI Capital expect credit growth to moderate in the range of 13-14 per cent led by moderation in unsecured portfolio like Credit card, Personal loan as well NBFC, which were impacted by increase in risk weights by RBI.
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