Shares of two of the leading private lenders in India fell on Tuesday after a downgrade by Fitch Ratings.

According to a PTI report, global rating agency Fitch Ratings has downgraded ICICI Bank and Axis Bank's Long-Term Issuer Default Rating (IDR) from "BBB-" to "BB+" and Viability Rating from "bbb-" to "bb+". The Outlook on the IDR is Stable.

Shares of ICICI Bank dropped as much as 1.3 percent to Rs 417.50, while shares of Axis Bank fell as much as 0.88 percent to Rs 805.80 on Tuesday, following the news. The latter recovered its losses to and rallied by 0.6 percent to hit an all-time high at Rs 826.25.

The rating action on the two banks comes after Fitch lowered its midpoint for India's operating environment to 'bb+' from 'bbb-'. It was based on the global rating agency's review conducted on the Indian banking sector's performance in the last three years, the regulatory framework, and the outlook in the near term.

Fitch said it has compared India with other sovereign jurisdictions in Asia rated in the 'BBB' category - such as in the key metrics of Gross Domestic Product per capita and the ease-of-doing-business ranking.

"The likely below-average performance of the sector over the next two years is in spite of our expectations of high economic growth and improving business prospects in India", rating agency added.

It said that the banks are positioned to leverage this growth opportunity, provided, their damaged balance sheets are remediated sustainably with fresh equity to support growth in a meaningful way.

While the performance of Indian banks should have largely bottomed out, but the sector is still struggling with poor asset quality and weak core capitalization, it said.