Banking stocks saw intense selling pressure on Wednesday with the Bank Nifty index crashing 7 per cent to 20,511, lowest since March 3, 2017. Private sector players IndusInd Bank (fell 24 per cent), Kotak Mahindra Bank (11.5 per cent) and HDFC Bank (8 per cent) saw the deepest cuts.
Analysts say investors have turned wary of the financial sector fearing the economic damage caused by the coronavirus pandemic could lead to spiralling of bad loans and also hurt demand for incremental credit. Investors also fear banks will be forced to offer forbearance packages to troubled businesses and individuals. Already, many banks have been sailing in troubled waters with regards to their exposure to distressed sectors like telecom, aviation and NBFCs.
The banking sector has been the worst hit in the ongoing market carnage. This year, the cumulative market cap erosion for listed banks has been Rs 9 trillion. The four biggest players HDFC Bank, ICICI Bank, Kotak Mahindra Bank and State Bank of India have each seen around Rs 1 trillion of market cap wiped out. Shares of most banks are quoting at multi-year lows. The fall in banking stocks has a huge bearing on the overall markets as the sector has the highest weighting in the benchmark indices. Also, banking stocks are the most over-owned by mutual funds as well as overseas investors.
Compiled by BS Researcu Bureau