HDFC Bank’s disappointing Q3 results and cautious outlook for private banks have caused tremors in the banking industry, with the Nifty Bank plunging 4%. The six large-cap lenders that make up around 80% of the weightage in Nifty Bank were down 2-7%.
The plunge in banking stocks was a result of HDFC Bank’s underwhelming Q3 performance, which fell short of market expectations. The bank reported a 14% increase in net profit from the previous year, but this was lower than the estimated growth of 22%. Additionally, the bank’s provisions for bad loans increased by 22% year-on-year.
Investor sentiment towards private banks was further dampened by the cautious outlook for the sector. Many analysts believe that private banks may face challenges in the coming months due to the economic slowdown, increased competition, and rising non-performing assets.
The overall decline in banking stocks had a significant impact on the Nifty Bank, which is an index that tracks the performance of the banking sector. All 12 Bank Nifty names were in the red, with stocks like State Bank of India, ICICI Bank, and Axis Bank experiencing losses of 2-7%.
This sharp sell-off in the banking pack shows the vulnerability of the sector to negative news and market sentiment. Investors are now closely watching the performance of other private banks, as their results could further impact the overall sentiment towards the sector.