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Why Banking Stocks Are The Worst Hit In The Present Carnage?

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It's almost unbelievable the amount of wealth destruction that has happened in banking and NBFC stocks in the last few weeks. A stock like IndusInd Bank, which until March of last year, was trading at a 52-week high of Rs 1,800 is down to Rs 282. Bandhan Bank a favorite of every astute investor is down from a 52-week high of Rs 650 to the current price of Rs 160. Similar is the story of every single bank, including large banks like State Bank of Indiam ICICI Bank and Axis Bank. Take a look at the wealth destruction for some of the banking from their 52-week highs:

 
Name 52-week high Current market price
IndusInd Bank Rs1,834 Rs 284
Bandhan Bank

Rs 650

Rs 159
Axis Bank

Rs 827

Rs 301
State Bank of India Rs 374 Rs 178
ICICI Bank Rs 552 Rs 288
PNB Rs 99 Rs 33
The Karnataka Bank Rs 128 Rs 38
Bank of Baroda Rs 144 Rs 55

Should you invest in banking stocks?

For the next few quarters, it's going to be extremely difficult for the banking sector. It would be a surprise, if non performing assets do not rise on account of the impact by the coronavirus. Several individuals have been jobless, and are likely to be without income for the next few weeks. It's highly possible that there could be defaults from individuals and businesses that have been impacted by the corona virus.

Why Banking Stocks Are The Worst Hit In The Present Carnage?

It's unlikely that the situation would get better anytime soon. In fact, we might see the next few quarters as very challenging for the banking sector. This has made investing in banking stocks a lot more risky than before. In fact, only those who have a 2-3 year perspective may find banking stocks attractive now. Even if you are looking at banking stocks, it would be prudent to look at the really larger players, given that some of them have halved from peak levels. The Yes Bank fiasco has made it extremely difficult for

The damage done by the coronavirus is going to take months to heal and maybe even years. Some businesses would no longer be the same. The government is likely to unleash some incentives for sectors that have been impacted. But again, given the limited fiscal space, the government's hands maybe tied.

 

As for investors who have the money, it may not be a bad idea to nibble into the big banking stocks.

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