Banking and financial stocks witnessed heavy selling pressure on Monday with the Nifty Bank index falling over two percent.
Banking heavyweights such as HDFC twins, ICICI Bank, Kotak Mahindra Bank, Axis Bank, and SBI led the losses, falling over one to two percent each, which dragged the equity benchmarks lower.
The sentiment was dampened after HDFC Bank reported June quarter earnings below street estimates.
HDFC Bank on July 17 posted a standalone net profit of Rs 7,729.64 crore in Q1FY22, a growth of 16.1 percent from Rs 6,658.62 crore in Q1FY21. However, net profit was below CNBC-TV18 analysts’ poll estimates of Rs 7,995.9 crore.
The bank’s net interest income (NII) increased 8.6 percent to Rs 17,009 crore from Rs 15,665.42 crore, YoY. NII was also below the CNBC-TV18 poll of Rs 17,698 crore.
The private lender’s net interest margin of 4.1 percent during the April-June 2021 period was at an 18-quarter low, while core operating profit was down 2.3 percent, QoQ at Rs 14,536 crore.
The bank’s asset quality also weakened during the quarter as gross non-performing assets in Q1FY22 were at 1.47 percent of gross advances as against 1.32 percent in Q4FY21, and net non-performing assets were at 0.48 percent against 0.40 percent, QoQ.
Analysts are of the view that disappointing earnings from HDFC Bank affected investor sentiment that led to selling pressure in other financial stocks.
Further, a surge in the Delta variant of coronavirus and fears of local lockdowns resurfaced concerns over the asset quality of the banks.
In other development, some of India's largest banks, including State Bank of India, HDFC Bank, Kotak Mahindra Bank, and IDFC Bank have joined hands before the Supreme Court to oppose Reserve Bank of India's (RBI) directive for disclosing inspection reports under Right to Information (RTI) Act.
The Supreme Court will hear the case on July 22.
At 12:15 pm, the Nifty Bank index was trading over 1.5 percent lower as compared to 0.66 percent loss on the benchmark Nifty.