YES Bank, HDFC Bank, RBL Bank shares lead losers as BSE Private Banks index tumbles 4%. Here's why

A mixed set of quarterly results by HDFC Bank Ltd triggered a selloff on private lending counters, with the benchmark BSE Private Banks Index tumbling nearly 800 points in Wednesday's trade. By 2.30 pm, the BSE Private Banks Index was down 768.58 points or 4.24 per cent at 17,361.53.  

HDFC Bank results showed heightened levels of credit/deposit (CD) ratio beyond RBI’s comfort levels, said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS. This, he said, is the case with most other banks as well. Kulkarni said the markets expect either margin pressure, in case banks go in for aggressive deposit mobilization, a slowdown in lending growth, or both. 

Shares of HDFC Bank plunged 7.91 per cent to Rs 1,546.10. YES Bank shares tanked 3.54 per cent to Rs 24.76. City Union Bank fell 3.39 per cent to Rs 145.15. RBL Bank was down 3.35 per cent to Rs 283.75. Kotak Mahindra Bank and IDFC First Bank declined more than 3 per cent. Axis Bank Ltd, ICICI Bank Ltd, AU SFB, Federal Bank dropped 2-3 per cent. IndusInd Bank and Bandhan Bank also fell over 1 per cent each. 

"This development can lead to some de-rating of the sector. After the significant up move we have witnessed recently, markets are taking a breather, especially since market valuations are higher than historical multiples. Thus, in the near term, we expect heightened levels of volatility in the markets while we remain constructive on the Indian markets from the medium to long-term perspective due to strong economic growth," he said. 
 
 InCred Equities said elevated cost of deposits and pressure on margins would be common issue for all banks in the coming quarters and that HDFC Bank is better placed due to its improved penetration providing portfolio granularity and command over loan pricing.

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