Banking shares continued under pressure with the Nifty Bank index hitting 15-months low on the National Stock Exchange (NSE).
At 03:03 p.m. Nifty Bank index, gauge of private and public sector bank index, was down 1.7% or 257 points at 15,614 as compared to 0.47% decline in the Nifty 50. The bank index hit an intra-day low of 15,453, its lowest level since October 13, 2014, in early morning trade.
Since January 1, 2016, Nifty Bank index plunged 8.5% against 5.5% fall recorded by the benchmark index.
State Bank of India (SBI), Axis Bank, Canara Bank, Federal Bank, Bank of India and IndusInd Bank from Nifty Bank index were down in the range of 2%-4% today.
Karnataka Bank, IDBI Bank, Indian Bank, UCO Bank, Andhra Bank, Allahabad Bank, United Bank of India and Federal Bank are among non-index banking shares slipped between 3%-7% on the NSE.
According to broking firm K R Choksey Shares and Securities, the October-December (Q3FY16) should mark as one of the toughest quarters particularly for PSU banks in the light of continued surmounting asset quality pressures.
“With Regulator insisting on expedition of balance sheet clean-up sooner than later, steep base rate cuts, flat G-sec yields and moderate economic recovery should keep the banks on their toes,” the broking firm said in a Q3 results preview.
Meanwhile, Moody's Investors Service and its Indian affiliate ICRA Limited believe that the gradually improving operating environment for Indian banks will lead to slower additions to problem loans over the next 12 to 18 months. As a result, the banks' credit metrics will stabilize.
"While the stock of non-performing loans may continue to rise, the pace of new impaired loan formation in the current financial year ending 31 March 2016 will be lower than the levels seen in the past four years," says Srikanth Vadlamani, a Moody's Vice President and Senior Credit Officer.
"A meaningful proportion of stressed loans have already been recognized as impaired, while economic conditions are improving," adds Vadlamani.
"But businesses remain vulnerable to the volatile Indian rupee as against the US dollar," says Vikas Halan, a Moody's Vice President and Senior Credit Officer. "Low commodity prices have also led to a sharp decline in external trade."
"In addition, corporate profits are constrained by the weak demand environment both locally, as well as in the export market, and the lack of a substantial pick up in investment activity, despite several measures initiated by the government," says Anjan Ghosh, an ICRA Executive Vice President and Chief Rating Officer, in a recent report.