Shares of major private lenders HDFC Bank, Axis Bank, Kotak Mahindra Bank, and Yes Bank fell sharply this week, erasing over Rs 1.5 lakh crore of investor wealth. The declines followed the release of Q1 results on Saturday, with HDFC Bank and Axis Bank shares dropping up to 9%, and Yes Bank and Kotak Mahindra Bank shares falling up to 3%. The Nifty Private Bank index has consequently declined over 4% in four sessions.
The broader market sentiment also contributed to the decline, as the Nifty 50 index fell nearly 2% over the same period. This was driven by escalating Iran-US tensions and rising oil prices, which have renewed inflationary concerns among investors.
Despite the downturn, analysts highlight the attractive valuations of these bank stocks, considering the high credit growth and low non-performing assets (NPA). VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted India's vulnerability to high oil prices as a macro concern. Equirus Securities identified Axis Bank as its top pick post-Q1 earnings, followed by HDFC Bank, ICICI Bank, and Kotak Mahindra Bank.
“Banking stocks appear attractively valued, particularly in the context of high credit growth and very low NPA.”
VK Vijayakumar, Chief Investment Strategist at Geojit Investments
Axis Bank is nearing an earnings inflection point, with improvements in retail disbursements and easing deposit-cost pressures. HDFC Bank remains a high-quality franchise, though its near-term net interest margin recovery is expected to be gradual. Macquarie maintained an 'Outperform' rating on ICICI Bank, HDFC Bank, and Axis Bank, citing ICICI Bank's 16% profit growth as exceeding expectations.
HDFC Bank reported a 5% YoY rise in net profit to Rs 19,060 crore for Q1 FY27, with NII up 7% YoY to Rs 33,534 crore. Axis Bank's net profit and NII rose 23% and 8%, respectively, while Kotak Mahindra Bank saw increases of 26% and 9%. Yes Bank reported a 34% YoY surge in net profit, with NII up 18%. ICICI Bank's standalone net profit increased 16% YoY to Rs 14,805 crore, with NII rising nearly 13%.
Background
The recent declines in private bank stocks come amid broader market volatility, influenced by geopolitical tensions and rising oil prices. Historically, such market conditions have led to increased investor caution, impacting stock valuations.
Looking ahead, investors may find opportunities in the current market conditions, as valuations become more attractive. However, the broader economic environment, particularly oil prices and geopolitical tensions, will continue to influence market dynamics.
