Banking shares continued to reel under pressure with the Nifty Bank index hitting 52-week low on the National Stock Exchange (NSE).
At 12:30 p.m. Nifty Bank index, gauge of private and public sector bank index, was down 1.4% or 231 points at 15,785 as compared to 0.7% decline in the Nifty 50. The bank index hit an intra-day low of 15,738, its lowest level since October 17, 2014.
Eight out 12 banks from the Nifty Bank index are trading at their multi-months low on the NSE. The list includes Axis Bank, ICICI Bank, State Bank of India (SBI), Federal Bank, Canara Bank, Punjab National Bank (PNB), Bank of Baroda and Bank of India.
Allahabad Bank, Indian Bank, Oriental Bank of Commerce and Union Bank of India, the non-index banks are trading at their 52-week lows.
Muted credit growth and margin pressures, following reduction in base rate by 25- 30 basis points (bps) across banks, is set to impact net interest income (NII) growth for the quarter ended December 31, 2015, Centrum Broking said in Q3FY16 results preview.
Further, while fresh slippages are expected to moderate sequentially, provisioning requirements are likely to remain high following Reserve Bank of India (RBI) directive towards recognition of stressed assets, added report.
Religare Institutional Research expects margins to come under pressure given the impact of a sharp 30-40bps cut in base rate that most banks took at the beginning of Q3. Net interest margins (NIMs) across the sector are likely to come off by around 5bps QoQ. Reductions in deposit rates are likely to make for a drop in lending yields, thereby limiting margin compression.
Since September 30, 2015, the Nifty Bank index has underperformed the market by falling 8% against 5.5% decline by the Nifty 50 index.
DCB Bank, Bank of Baroda, PNB, Canara Bank, Union Bank of India and Bank of India have fallen more than 20% each during the period.