After its continued gaining streak, the benchmark index Sensex declined around 500 points in trade on Friday as banking stocks came under sharp selling pressure. State-run lenders bore the brunt of the carnage with the PSU bank index ending 6 per cent lower. The NSE Nifty also ended at 8,808.90 down by 143.45 points.
This is its worst drop since January 6, 2014 when it tanked by 854.86 points.Shares in Bank of Baroda, India’s second-biggest lender by assets, declined as much as 15 per cent after the lender reported a 69 per cent fall in quarterly profit. The lender’s net profit stood at Rs330 crore in third quarter as compared to Rs1,050 crore in the year-ago period.
The sentiments for banking stocks were further dented after ICICI Bank, India’s biggest private lender, reported deterioration in asset quality. Market experts believe that banking stocks could get de-rated. ICICI Bank shares fell as much as 7 per cent despite the lender reporting a record profit of Rs2,889 crore. and CEO Animesh Chauhan said the bank restructured assets worth Rs2,050 crore in the quarter, while loans worth Rs1,340 crore turned bad.
PSU banks have long been constrained by a pile of bad loans, mainly due to a slowdown in economic growth in the past two fiscal years, pulling profitability well below their private-sector rivals. State lenders recorded their highest-ever level of stressed loans in September at 12.9 per cent of total advances, while the same ratio in the private sector was just 4.4 per cent.