Dalal Street bleeds: Mcap of these 5 private sector banks declines by ₹1.44 lakh crore in a day; HDFC Bank worst hit

The evident cause behind this downturn appears to be investors being unhappy with the bank’s Q3FY24 performance.

Other leading private sector banks also experienced a significant fall in today’s trading session. Kotak Mahindra Bank witnessed a substantial drop in its shares by 3.7%, while Axis Bank, ICICI Bank, and IndusInd Bank saw their shares decline by 3.3%, 2.7%, and 1.4%, respectively.

In terms of market capitalisation, Kotak Mahindra Bank witnessed a decrease of ₹20,143 crore, ICICI Bank faced a decline of ₹19,000 crore, Axis Bank experienced a reduction of ₹11,000 crore, and IndusInd Bank saw a dip of ₹1,792 crore. Collectively, the market capitalisation of these five private sector banks plummeted by ₹1.44 lakh crore in today’s trading session.

Margin concerns

Despite reporting a notable improvement in net profit by 33% on a Year-over-Year (YoY) basis, HDFC Bank faced challenges as its core net interest margin (NIM) on total assets decreased to 3.4% from 3.65% in the previous quarter (Q3FY23). It’s worth noting that the NIM stood above 4% for the bank before its merger with the parent company Housing Development Finance Corp (HDFC).

Also Read: HDFC Bank share price cracks over 8% after Q3 results, erases over a lakh crore in m-cap; what should investors do?

The bank’s provision came in higher at ₹4,217 crore on a standalone basis compared to ₹2,904 crore in the quarter-ago period. Provisions for the reporting quarter included a ₹1,200 crore hit taken on the entire exposure to the alternate investment funds (AIFs) segment, where the RBI has tightened the norms due to fears of it being used for evergreening of loans.

The bank’s operating expenses during the quarter jumped to ₹15,900 crore, up by 28.1% YoY. Following the bank’s December quarter performance, brokerage houses remain divided on the stock, with some maintaining a positive outlook while others trimming their target price on the stock.

“The third quarter performance seems at par; however, the higher CDR (110%) and lower LCR (110% in 3Q against 126% in 2Q) are cause for concern. The lower LCR and slower deposit growth may limit NIM’s expansion going forward. The reported NIMs of 3.6% (for interest-earning assets) came below expectations. The lower LCR, CDR bottleneck, and slower deposit growth may squeeze NiMs going forward. We believe the street is concerned about the above factors. Nevertheless, we may witness recovery in the coming period. We have a 12-month price target of 1,700 apiece,” said Ajit Kabi, Research Analyst at LKP Securities.

Also Read: Nifty Bank hits 5-week low, tumbles 4.3% as HDFC Bank stock takes a sharp nosedive

Biggest intraday drop since June 2022

The sharp drop in banking shares impacted the Nifty 50’s performance in today’s trade, leading to a significant drop of 2.08%, with the index settling at 21,571 points. Notably, this intraday dip wiped out all the gains accumulated over the last five trading sessions, marking the index’s most substantial intraday drop since June 2022.

Also Read: Stock market today: Nifty 50, Sensex suffer biggest single-day loss since June 2022; investors lose nearly ₹5 lakh crore

The S&P BSE Sensex also experienced a considerable decline of 1,628 points, or 2.23%, concluding the session at 71,500 points. Among sectoral indices, the Nifty Bank witnessed a sharp drop, plunging by 2,060 points, or 4.28%, marking the most significant intraday fall since February 2022.

Other sectoral indices that experienced declines include Nifty Metal (down by 3.13%), Nifty Realty (-1.42%), Nifty Auto (-1.42%), and Nifty FMCG (-0.87%). On a positive note, only Nifty IT managed its strong run, finishing today’s trade with a gain of 0.64%.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 17 Jan 2024, 07:30 PM IST