Financials under pressure; ICICI Bank, RBL Bank, IndusInd slip up to 7%

Financial stocks were under pressure at the bourses, falling up to 7 per cent, in intra-day trade on the National Stock Exchange (NSE) on Monday on concerns over near-term growth momentum and asset quality improvement due to the pandemic-induced local lockdowns on continuously rising Covid-19 cases.

At 09:52 am, the financials related indices - Nifty Bank, Nifty Financial Services, Nifty PSU Bank, Nifty Private Bank indices – were down in the range of 4 per cent to 6 per cent on the NSE. In comparison, the Nifty50 index was down 2.7 per cent at 14,228 points.

AU Small Finance Bank, IDFC First Bank, RBL Bank, ICICI Bank, Axis Bank, IndusInd Bank, State Bank of India, Bajaj Finance, Housing Development Finance Corporation (HDFC) slipped 5 per cent to 7 per cent in intra-day trade.

Analysts at Emkay Global Financial Services in banking, financial services and insurance (BFSI) sector update said that the brokerage firm believes that the underlying credit appetite remains strong and reflects rising consumerism, and thus the impact of the pandemic-induced lockdowns could be just a pause. That said, we believe near-term growth momentum and asset quality improvement could be at risk, hence we recommend to stay put with quality stocks, it said.

Emkay Global Financial Services said it hosted a call with Mr. Kaushik Mehta, Founder and CEO of RULoans Distributions, one of the largest DSAs, to discuss the recent business trends in retail loans and to gauge the impact of recent localized lockdown, if any.

The first fortnight of April 2021 has been weak in terms of business (already down 20 per cent) due to lower working days and onset of an aggressive second wave of Covid-19 infections. With stricter lockdowns now in place, Mr. Mehta expects business should be down 40 per cent by month-end, but will still be better than last year as lockdowns are largely localized without much impact on the salaried class, the brokerage firm said in a report.

He believes that the credit appetite is likely to remain intact, but lenders may turn cautious, which could hurt growth in the near term. That said, growth will return once the lockdowns are eased, particularly in secured segments, and largely offset the lost business, it said.