The outlook has rapidly soured for India’s $433 billion banking sector after a uncommon selloff in HDFC Bank Ltd., the nation’s largest non-public sector lender.A gauge of the nation’s high 12 largest banks is about for its worst week since September, erasing almost $21 billion in market worth via Thursday’s shut. Two-thirds of that bruising loss got here from HDFC Bank, whose quarterly numbers confirmed falling internet curiosity margins and weaker deposit progress. India’s lenders started 2024 on the again of their finest annual acquire in US greenback phrases in 4 years. The sector was touted as a high guess alongwith tech shares in an off-the-cuff survey of market members by Bloomberg final month. HDFC Bank’s earnings has now raised concern about studies from friends ICICI Bank Ltd, Kotak Mahindra Bank Ltd and Axis Bank Ltd.

“The days when banks would trade at more than three-times their price-to-book are over,” mentioned Seshadri Sen, strategist at Emkay Global Financial Services Ltd. “Most large-cap banks are expected to show slower earnings growth in FY25 than the preceding years, which would be a drag on the stocks.”

Private sector banks and non-bank lenders “could also see challenges” in the event that they chase market share in loans on the expense of margins as liquidity stays tight, Goldman Sachs Group Inc. analyst Rahul Jain wrote in a notice Thursday.

ICICI Bank and Kotak Mahindra will report quarterly earnings on Jan. 20, with Axis Bank because of announce on Jan. 23.

The sector’s waning prospects is dangerous information for the broader market. The nation’s high 5 non-public lenders make up greater than 1 / 4 of India’s key NSE Nifty 50 Index, and banks accounted for 15% of the gauge’s acquire final yr, knowledge compiled by Bloomberg present.