Nifty Bank falls 3.3% and reaches a 5-week low as HDFC Bank shares sharply declines

Screenshot 2024 01 17 103148 HDFC Bank

HDFC Bank Q3 Report Rattles Nifty Bank Index: Market Plunge and Analyzing the Impact In the early trade on Wednesday, the Nifty Bank Index faced a substantial setback, experiencing a nearly 3.3% decline to hit a five-week low of 46,534 points. The primary culprit behind this plunge was the sharp drop in HDFC Bank stock, triggered by the market’s tepid response to the bank’s Q3FY24 performance, unveiled on Tuesday post-market hours.

HDFC Bank Market Turbulence

HDFC Bank shares opened Wednesday’s trade with a significant gap down, plummeting by 6.50% to ₹1,570 apiece. The downward trend persisted, reaching an intraday low of ₹1,560, reflecting a staggering 7% decline. Given HDFC Bank’s substantial 14% weightage in the Nifty 50, its performance significantly influenced the index during today’s trade.

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Nifty Bank Index Plunge and Broader Implications

The benchmark index witnessed a decline of 252 points, reaching 21,780 as of 09:30 am, with HDFC Bank alone contributing 182 points to this downturn. The contagion effect extended to other banking stocks, with 11 out of the 12 stocks in the index trading in the red. Federal Bank shares are down 1.4%, followed by IDFC First Bank, Kotak Mahindra Bank, Bandhan Bank, Axis Bank, ICICI Bank, State Bank of India, and Bank of Baroda, all currently trading with declines between 0.6 and 1.3%.

External Factors Adding to Market Turmoil

Simultaneously, factors beyond HDFC Bank’s performance contributed to the market turmoil. The Dollar Index reached a one-month high, and a surge in US bond yields surpassing 4% added to the unease. Additionally, the rise in tensions in the Middle East further intensified the decline in Indian stocks during today’s trade.

HDFC Bank Q3 Performance Analysis

HDFC Bank, India’s largest private sector bank, reported a robust 33% jump in its net profit to ₹16,372 crore in Q3 of FY24, compared to ₹12,259 crore a year ago. The net interest income (NII) rose to ₹28,471 crore in Q3 of FY24 from ₹27,385 crore in the previous quarter. The core net interest margin remained unchanged sequentially, rising 3.4% on total assets and 3.6% on interest-earning year-on-year.

Despite these positive indicators, HDFC Bank’s gross non-performing assets (NPAs) saw a slight uptick, standing at 1.26% in Q3 of FY24, up from 1.23% last fiscal year. Net NPAs in Q3 of FY24 stood at 0.31%, compared to 0.33% last year.

Mixed Market Sentiment: Brokerage House Divisions

Following HDFC Bank’s December quarter performance, brokerage houses remain divided on the stock. While some maintain a positive outlook, others are trimming their target price on the stock. This divergence in opinion adds an additional layer of uncertainty for investors, contributing to the fluctuations in HDFC Bank’s share price and its ripple effect on the broader banking index.

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In conclusion, the market turbulence fueled by HDFC Bank’s Q3 report showcases the delicate balance of investor sentiment and external factors influencing the financial landscape. As market participants navigate these challenges, the resilience and adaptability of both individual stocks and the broader indices will be closely observed in the evolving market dynamics.

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