Over the last 10 days, Kotak Mahindra Bank Ltd and HDFC Bank Ltd have emerged as these lifeboats. Meanwhile, Nifty Bank index lost over 6 per cent since 23rd September, these stocks have weathered the selling pressure.
The collapse of Punjab and Maharashtra Co-operative Bank Ltd, which had absurdly high exposure to real estate developers, brought to the fore the vulnerabilities of Indian banks.
The Indian banks have an uncomfortable exposure to non-banking financial companies (NBFC) that finance real estate developers (HFCs), realized by investors. “Negative news flow around HFCs/NBFCs and banks has overshadowed the recent tax cut tailwind, bringing the focus back on sector issues: liquidity issues and contagion risks,” analysts at Jefferies India Pvt.
The result was a massive fall in stock prices, and banks such as Yes Bank Ltd and RBL Bank Ltd saw their valuation erode sharply. According to Jefferies India, Yes Bank has an exposure of more than Rs 10,000 crore to troubled companies it terms as ‘high risk’.
Read EquityPandit’s Nifty Bank Outlook for the Week