The obvious cause behind this decline seems to be investors unhappy with the bank’s Q3FY24 performance.
Other major private banks also experienced a significant fall in today’s trading session. Kotak Mahindra Bank witnessed a steep fall 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 capitalization, Kotak Mahindra Bank witnessed a decline 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 decline of ₹1,792 crores. Collectively, the market capitalization of these five private sector banks declined ₹1.44 lakh crore in today’s trading session.
Fringe concerns
Despite reporting a remarkable improvement in net profit by 33% on Year-over-year (YoY), HDFC Bank faced challenges as its core net interest margin (NIM) on total assets declined to 3.4% from 3.65% in the previous quarter. (Q3FY23). It is worth noting that the NIM stood above 4% for the bank before its merger with parent company Housing Development Finance Corp (HDFC).
Also Read: HDFC Bank share price cracks over 8% after Q3 results, wipes over lakh crore in m-cap; what should investors do?
The bank’s stock came in higher at ₹4,217 crore on standalone basis as compared to ₹2,904 crore in the quarter-ago period. Provisions for the reporting quarter included a ₹1,200 crore hit the entire exposure to the alternative investment funds (AIF) 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 28.1% YoY. Following the bank’s December quarterly performance, brokerage houses remain divided on the stock, with some maintaining a positive outlook while others trim their target price on the stock.
“The performance of the third quarter appears flat; however, the higher CDR (110%) and lower LCR (110% in 3Q vs. 126% in 2Q) is cause for concern. The lower LCR and slower deposit growth may limit NIM expansion going forward. . The reported NIMs of 3.6% (for interest-earning assets) was below expectations. The lower LCR, CDR bottleneck and slower deposit may push NiMs forward. We believe, that the street is concerned about the above factors. However, we can witness a recovery in the coming period. We have a 12-month price target of 1,700 a piece,” said Ajit Kabi, Research Analyst at LKP Securities.
Also Read: Nifty Bank hits 5-week low, falls 4.3% while HDFC Bank stock falls sharply.
Biggest intraday drop since June 2022
The sharp drop in banking stocks affected the performance of the Nifty 50 in today’s trade, leading to a significant drop of 2.08%, with the index settling at 21,571 points. Notably, this intraday decline erased all the gains accumulated over the last five trading sessions, marking the index’s biggest intraday drop since June 2022.
Read also: Stock market today: Nifty 50, Sensex suffer biggest one-day loss since June 2022; investors almost lose ₹5 lakh crores
The S&P BSE Sensex also experienced a considerable decline of 1,628 points, or 2.23%, ending the session at 71,500 points. Among sectoral indices, the Nifty Bank witnessed a sharp fall, plunging by 2,060 points, or 4.28%, marking the most significant intraday drop since February 2022.
Other sectoral indices that experienced declines include Nifty Metal (down 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, ending today’s trade with a gain of 0.64%.
Disclaimer: The opinions 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 making any investment decisions.
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Published: 17 Jan 2024, 19:30 IST