Financial shares under pressure; IndusInd Bank, RBL Bank slip up to 24%

ICICI Bank, IDFC First Bank and Axis Bank were down in the range of 10% to 11%, while HDFC, Bajaj Finance, SBI, Federal Bank and Power Finance Corporation were down 8% to 9% on the NSE.

Shares of financial sectors, including banks and non-banking financial companies (NBFC), were under pressure falling by up to 24 per cent on the National Stock Exchange (NSE) on Monday on expectation of slower growth amid coronavirus concerns.

At 03:00 pm; Nifty Bank, Nifty Financial Services and Nifty Private Bank indices were down between 8.3 per cent and 9 per cent, as against 7.8 per cent decline in the Nifty 50 index. However, Nifty PSU Bank index was down 5.5 per cent on the NSE.

RBL Bank has tanked 24 per cent to Rs 158, its lowest level since August 31, 2016. The stock of private sector lender slipped 30 per cent, on concerns of the bank’s valuations would stay under pressure due to the stress emerging in the mid-corporate space, coupled with the bank’s relatively high exposure to risky assets.

The fall comes despite bank's clarification that it is "financially strong and well-capitalized". In past two months, the stock has plunged 54 per cent from level of Rs 346, as compared to 23 per cent fall in the Nifty 50 index. 

Among other counters, IndusInd Bank slipped 18 per cent to Rs 656 on the NSE in intra-day trade on Monday, falling 52 per cent in past two months. The stock hit a 52-week low of Rs 551 on Friday, March 13 on the NSE in intra-day trade.

ICICI Bank, IDFC First Bank and Axis Bank were down in the range of 10 per cent to 11 per cent, while Housing Development Finance Corporation (HDFC), Bajaj Finance, State Bank of India (SBI), Federal Bank and Power Finance Corporation between 8 per cent and 9 per cent on the NSE.

Analysts at JM Financial Institutional Securities expect the earnings trajectory across the sector to moderate on the back of lower balance-sheet growth, which is usually accompanied by pressure on net interest margins (NIMs).

“We continue to favour larger banks with better economies of scale, strong liability franchises and lower exposures to weaknesses in mid-corporates and small and medium enterprises (SMEs),” the brokerage firm said in sector update.

Meanwhile, the Reserve Bank of India is expected to hold a media interaction later in the day today. It is widely expected that the central bank will cut rates and announce measures to boost sentiment.