Axis Bank stock on Wednesday declined by five per cent after Morgan Stanley downgraded the stock to underweight.
On the NSE, the stock ended the day down 4.8 per cent to Rs 931.80. On the BSE, the stock fell to Rs 930.35, down 4.9 per cent.
The report by Morgan Stanley has cited slowing asset growth, lower fee income growth, higher provisions and potential capital raising as factors responsible for the downgrade to underweight from equal-weight.
“…risk that asset quality conditions could deteriorate further in the event of a deep and protracted slowdown — this is especially owing to rapid growth in sectors under asset quality stress,” said the report.
The report further added that the bank’s high exposure to the infrastructure sector was also another reason for the downgrade.
Sector story same
Analysts say that the story is the same for most of the banking sector stocks. Broking firm, Nirmal Bang, in a report last month had given a negative outlook for the entire sector.
“In the backdrop of a slowing domestic economy and with the Government failing to take major policy decisions, Indian banks are faced with mounting non-performing loans and higher restructured standard loans as corporate sector suffers from inadequate demand, pressure on margins and high interest rates,” the report had said.
As a result, valuations are expected to get cheaper as the equity market and the banking sector’s valuations are not factoring in vulnerability of the country’s economy to outflow of foreign capital, said the report. Market experts concur that the exposure of the banks to the aviation, power and infrastructure sector had weighed them down. “Government needs to take initiatives as only then the sector will see some revival,” said Karthik Mehta, AVP — Research, Sushil Financial Services.
On Wednesday, the banking sector index on the NSE — Bank Nifty — fell by about two per cent.
The only stock among the Bank Nifty stocks to see a rise was that of HDFC Bank which went up 0.3 per cent to Rs 592 a share.