Mumbai: Shares of most large private lenders fell on Monday after their first-quarter earnings performance, announced over the weekend, showed pressure on profitability.
declined 5.4%,
fell 5.1%, while
and
dropped 2.8% and 2%, respectively.
, however, ended 1.2% higher. The
fell 1%, while the Nifty 50 ended 0.4% lower. The Nifty Private Bank index tumbled 2.3%.
"Among the private banks that reported results over the weekend, except for ICICI Bank, most others saw softer
(NIMs) and lower provisions, due to which profits looked higher," said Narendra Solanki, head of fundamental research at Anand Rathi Share and Stock Brokers. "The market is now pricing in margin compression, which is reflected in the weakness seen across banking stocks."
Solanki said HDFC Bank's earnings also missed expectations due to a decline in its CASA ratio and a higher base stemming from the one-time gain from the HDB Financial Services IPO in the corresponding quarter last year.
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Bank shares have shown signs of a revival of late in the wake of renewed foreign fund flows after record withdrawals from the sector in 2026. In July so far till Friday, the Private Bank Index had risen 2.1% as against the 2% gains in Nifty. Foreign investors returned to financials in the second half of June, buying shares worth ₹14,634 crore after pulling out ₹11,263 crore in the first part of the month. From January to May, they had withdrawn ₹114,826 crore from the sector.
Macquarie maintained an 'Outperform' rating on ICICI Bank, HDFC Bank and Axis Bank after the first quarter results. The brokerage said ICICI Bank's profit growth of 16% year-on-year exceeded expectations and that valuations of HDFC Bank and Axis Bank remain reasonable.
Macquarie's Suresh Ganapathy and Dev Shah remained 'Neutral' on Kotak Mahindra Bank, "given Kotak's subpar ROE(return on equity) trajectory and continuing challenges in accelerating deposit mobilisation."
Sunny Agrawal, head of research at SBI Securities, said that barring ICICI Bank, leading private lenders such as HDFC Bank, Axis Bank and Kotak Mahindra Bank reported relatively lower growth in net interest income (NII) compared with balance-sheet growth, indicating pressure on NIMs.
"Going forward, as deposits are repriced, banks mobilise FCNR deposits and contribution from high-yielding retail portfolio increases, margins should expand," he said. Agrawal also said ICICI Bank delivered an all-round performance, with strong double-digit growth across advances, deposits, NII and profit after tax. Among leading private-sector lenders, ICICI Bank remains his top pick, followed by Axis Bank.
For Solanki as well, ICICI Bank remains a preferred pick, while HDFC Bank can be considered a contra bet at current levels for investors with a horizon of more than a year.