On October 18, banking and financial service company stocks faced significant selling pressure, primarily due to concerns about declining profit margins, which unnerved investors. This led to the Nifty Bank and Nifty Financial Services indices becoming the day’s worst performers.
By 4 PM, the Nifty Bank index had declined by 1.17%, and the Nifty Financial Services index had dropped by 1.28%. Simultaneously, the Nifty PSU Bank index witnessed a decline of 1.67%.
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In its earning report, HDFC Bank, harbinger stock for the banking sector, declared that its margins fell; analysts backed this while expressing disappointment in its earnings. Independent market expert Sandip Sabharwal cited that it lacked net interest income (NII) alongside operating profit growth, both of which were much lower than expected. Except for the overall advanced growth, which remained strong with asset quality holding up, he expressed that the bank’s overall numbers were average. The stock shed 1.44% today and now stands at Rs 1,519 per share as compared to the previous close of Rs 1,540.
Investors and analysts alike are now expecting a similar performance by other banks. Concurrently, the leading position on the list is held by Yes Bank, which is currently trading at a significant 96% below its historical peak of over Rs 400 achieved in August 2018. Nevertheless, corporate governance concerns associated with its promoter, Rana Kapoor, heavily impacted the stock’s performance, causing it to decline to a mere Rs 3 per share. However, as of Wednesday, the stock is now fluctuating around the Rs 17 mark and has gone up 0.29% today.
Among several other wealth-destroyers, state-owned banks, including Bank of India, Indian Overseas Bank, Union Bank of India, Punjab National Bank, IDBI Bank, and Canara Bank, have seen declines of 55% to 80% from their historical peak values.
The banking sector is not the only one that is facing this issue. According to Ace Equity, as many as twenty-four counters are currently trading up to 50 to 96 per cent below their all-time record highs. The list includes but is not limited to a host of retail favourites like Adani Total Gas (down 85 per cent), Adani Green Energy (down 70 per cent) and Vodafone Idea (down 92 per cent). New-age internet companies including FSN E-Commerce Venture Nykaa (down 66 per cent), One97 Communications Paytm (down 52 per cent) and PB Fintech PolicyBazaar (down 50 per cent) have also tumbled from their record highs.
However, market experts have tagged PolicyBazaar and Paytm as ‘buy’s, with the latter getting a stamp of approval from reputed investment banking firm Goldman Sachs. Hemang Jani, an independent market expert, also recommends Paytm sees an upside of 20-25 per cent from the current levels. In the metal and mining space, he picks NMDC.