Bank stocks were under pressure with the Nifty Bank index falling 3 percent from its intraday high on Friday, after rating agency India Ratings and Research (Ind-Ra) revised its outlook on the banking sector to ‘Negative’ for the second semester. – October to March (H2FY21) from ‘Stable’.
Bandhan Bank, RBL Bank, HDFC Bank and IDFC First Bank were down 3%, while Federal Bank, State Bank of India (SBI), Punjab National Bank and IndusInd Bank of the index fell in the 1% range. at 2 percent on the National Stock Exchange (NSE).
At 02:42 pm, the Nifty Bank index was the main loser among industry indices. The index was down 1.9 percent to 21,895 points, compared with a 0.35 percent drop in the Nifty 50 index. The banking index hit an intraday low of 21,785, 3 percent below its intraday high. of 22,469 points.
The negative outlook comes in light of an expected increase in stressed assets, higher credit costs, weaker earnings due to reversal of interest and lower fee income, and attenuated growth prospects as a result of measures taken to contain the spread. of Covid-19. In addition, capital buffers for most public sector banks (PSBs) remain modest. In the bearish case of Ind-Ra, the increase in assets under stress due to the pandemic is expected to double credit costs for the banking system than the pre-Covid-19 levels estimated. for fiscal year 21.
Ind-Ra has maintained a stable outlook for private banks as they are better able to cope with the challenges posed by the pandemic. Most of the big banks have strengthened their capital reserves, created contingent provisions and been proactive in managing the loan portfolio, he said.
While the system’s credit growth could remain anemic and short-term financial performance could deteriorate moderately, large banks can benefit from credit migration. As opportunities arise, these banks are in a position to see substantial franchise growth in the medium term, given that they have also increased their capital buffers in recent months, Ind-Ra said.
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