Bank shares were under pressure with the Nifty PSU Bank index hitting a 52-week low, while Nifty Bank index dipped more than 2% on the National Stock Exchange (NSE).
IDBI Bank, Bank of Baroda, Punjab National Bank (PNB), Oriental Bank of Commerce, Syndicate Bank, Allahabad Bank and Union Bank of India from the public sector undertakings (PSUs) were down more than 3% each.
ICICI Bank, State Bank of India (SBI), Yes Bank, Kotak Mahindra Bank, Axis Bank, Bank of India and IndusInd Bank down 2%-3% on the NSE.
At 11:51 a.m. Nifty Bank index was down 2.2% or 375 points at 16,664 as compared to 1.8% decline in Nifty 50 index.
Nifty PSU Bank index which was down nearly 3% touched a 52-week low of 2,820 in intra-day trade today. PNB hit a 52-week low of Rs 114, while Bank of India, SBI, Canara Bank and Allahabad Bank were quoting near their 52-week lows on the NSE.
According to Religare Institutional Research analysis of 10 out of 15 strategic debt restructuring (SDR) cases suggests that this scheme is in no way a cure-all for Indian banks’ deteriorating asset health – instead it exacerbates the risk by deferring an estimated Rs 1.5 trillion (US$ 23bn) of NPA formation (30-40 accounts or 2.2% of total credit) from FY16/FY17 to later years.
The brokering firm expects many SDR cases to fail, resulting in high and chunky slippages in FY17/FY18.
“Credit cost will surge for both PSU as well as private sector corporate lenders due to rising stress in the system from mounting cases of SDR/5:25 refinancing as well as exposure to large leveraged groups. The margins could sag due to higher interest reversals and a transition to marginal cost-based lending,” Religare Institutional Research said in a report on Indian Banks dated January 4, 2016.
Analysts recommended to avoids corporate lenders/banks with high exposure to highly levered groups; prefer retail-centric private banks.