As markets continue to witness a downfall that is yet to find a bottom, marquee names in the banking sector like HDFC Bank, ICICI Bank, Axis Bank, and IndusInd Bank are being beaten on the bourses like never before.
As share markets continue to witness a downfall that is yet to find a bottom, marquee banking sector stocks such as HDFC Bank, ICICI Bank, Axis Bank and IndusInd Bank are being beaten on the bourses like never before. In less than a week of trading HDFC Bank has fallen 24 per cent; ICICI Bank has slumped 27 per cent; Axis Bank is down 25 per cent; and the biggest loser among the private sector banks IndusInd Bank has tanked 50 per cent. India’s largest public sector bank, State Bank of India too has been in the grip of bears, falling 17 per cent in a week. The only bank share to have detached itself from the fall is Yes Bank, gaining 100 per cent in a week.
“There were also fears that a recessionary trend could emerge, and hence large-size banks fell sharply,” said Shrikant Chouhan, Senior Vice-President, Equity Technical Research, Kotak Securities while commenting on the fall in bank stocks on Wednesday. The reason for bank stocks plummeting is however, not restricted to one. Since last week, private lenders like ICICI Bank, Kotak Mahindra Bank, Axis Bank, Federal Bank, IDFC Bank and SBI have stepped-up to bail-out the cash-starved Yes Bank and suffered collateral damage as telecom operators struggle to get some relief on their adjusted gross revenue (SGR) dues. Although Yes Bank is now trading at above Rs 50 per share, up from Rs 23 apiece last week, the banks that are trying to save it are taking the beating.
“Yes Bank’s stock price has rallied sharply post announcement of its restructuring plan. In contrast, larger and ‘fully operational’ franchises such as IndusInd Bank and Bandhan have seen sharp erosion in market cap by 60% and 49% over the last 3 months. Even larger franchises like ICICI Bank, Axis Banks and HDFC Bank have seen sharp corrections and are quoting at 1.2x, 1.5x and 2.5x FY21E BVPS respectively, for the core banking businesses,” said JM Financial in a research note.
The Supreme Court’s refusal to let telecom operators assess their adjusted gross revenue dues, has again put banks with exposure to the telecom sector in the limelight. According to Emkay Global Financial Services, IDFC Bank has the highest exposure to Vodafone Idea, followed by Yes Bank, State Bank of India, and Punjab National Bank.
Yes Bank crisis has also augmented fear among the public of private banks going bust, analysts say. It is not just only the public, earlier this month Maharashtra government decided to pull all money from private sector banks and park it in Public-sector lenders. “We could see a flight-to-safety of deposits from smaller/mid-size banks to larger and more stable banks. Mid size banks have already seen a sharp correction in share prices since the announcement of moratorium on Yes Bank,” JM Financial added.
However, analysts are still upbeat on big banks to bounce back as soon as the fear of recession bottoms out and equity markets start correcting. “ICICI Bank has re-emerged as a strong retail bank over the years, with a clear focus on profitability vs. growth, which coupled with its strong liability franchise, PCR, capital and stable management, makes it the best fit for the current tough times,” said analysts at Emkay Global. JM Financial too sees bigger banks like ICICI Bank, HDFC Bank and Axis Bank, with better economies of scale and lower exposure as the best bets in the current turmoil.