Most private bank stocks suffered significant losses in morning trade on Monday, 19 October, dragging the Nifty Bank index down by 1%. Shares of Axis Bank crashed 5%, while those of HDFC Bank and ICICI Bank declined more than 2% and 1%, respectively, during the session. Stocks such as Kotak Mahindra Bank and YES Bank declined up to 1%.
Why are banking stocks falling?
Major banking stocks declined after announcing their Q2 results. HDFC Bank reported a nearly 5% year-on-year (YoY) increase in standalone net profit to ₹19,509.96 crore. Net interest income (NII) increased 9.72% YoY to ₹34,619.18 crore in Q2 FY27. Net interest margin (NIM) stood at 3.16% on total assets and 3.32% on interest-earning assets.
ICICI Bank reported a 20.1% YoY growth in standalone net profit to ₹14,843 crore. NII increased 17.7% to ₹25,339 crore, while NIM declined 12 basis points sequentially to 4.18%.
Axis Bank reported a 37.6% YoY increase in standalone net profit to ₹7,003 crore. NII rose 12% to ₹15,371 crore, while NIM stood at 3.36%.
YES Bank’s net profit increased 65% YoY to ₹1,080 crore. NII increased 22.7% YoY to ₹2,822 crore, while NIM stood at 2.6% versus 2.5% in Q2FY26 and 2.7% in Q1FY27.
“Expectations were high, and the results were mixed, particularly on certain fronts. That is what is weighing on sentiment. However, if you look at the broader trend, especially in PSU banks, it appears strong. Some private banks, including Kotak Mahindra Bank, ICICI Bank and others, are also holding up,” said Ajit Mishra, SVP – Research, Religare Broking.
Mishra added that crude oil prices are still around $106–107 per barrel. If prices cross $110, they could move towards $115. Any further correction in the broader market could also lead to a decline in major private banking stocks.
Pankaj Pandey, the head of research at ICICI Securities, believes there is nothing particularly negative from a results perspective for large private banks.
Pandey pointed out that PSU banks are doing relatively better, largely because of the correction in global bond yields, which has offered some respite. As a percentage of their treasury income, PSU banks were more exposed to the impact of higher yields.
What should investors do?
“As and when opportunities arise, investors may consider these stocks as well. However, we are still not very confident about the trend of FIIs continuously selling in the cash market, especially when crude oil prices remain elevated,” said Mishra.
“I would rather recommend accumulating these stocks gradually. There is a case for positioning oneself at current levels, especially when the overall market environment is not very positive,” said Mishra.
Pandey also recommends buying banking stocks. “Private banks look relatively more attractive from a valuation and growth perspective. Investors can consider fresh buying in HDFC Bank,” he said.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
