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Khushi Patel made post

What is the reason that banking stocks like Axis Bank, IndusInd Bank and HDFC Bank come under pressure on 14 July trading?

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Anjana Aiyar answered.
3 weeks ago

The reason for the sharp correction in the Nifty and Sensex on 14 July was the fall in the Bank Nifty. Most financial heavy weights like HDFC Bank, HDFC and SBI came under selling pressure. The Nifty Bank index was down 4% and actually dragged the index down. The fall in the banking stocks was almost uniform across PSU banks and private banks.

The fall was much sharper in the more vulnerable banks like IndusInd Bank, Bandhan Bank and Axis Bank as these banks are likely to feel the pressure on multiple fronts. The end of the EMI moratorium is likely to put pressure on banks. India Ratings has also projected the stressed assets of private banks to rise to 5%, which is a fairly large number.

The correction in banks began with HDFC Bank after it initiated a probe into improper lending practices in its vehicle financing arm as well as conflicts of interest. HDFC Bank has also seen a series of very senior level exits and that has not gone down well with the markets. In the last 3 months, Nifty Bank has underperformed the Nifty Index.

The worries in financials also extended to NBFC stocks as Bajaj Finance, M&M Finance, Cholamandalam Investments and Shriram Transport Finance corrected up to 8%. The sentiments around NBFCs also took a hit after Fitch raised doubts over the recovery of NBFCs as the lag effect of the pandemic was likely to linger much longer.