Stock market crash: Markets continue downward spiral, Nifty below 21,500; HDFC Bank extends losses

In a tumultuous start to the trading day, the stock markets witnessed a sharp downturn as the Sensex plummeted by 561 points to 70,939, and the Nifty followed suit with a substantial 165-point dip, resting at 21,406. The early morning sell-off painted a grim picture as all sectoral indices traded in the red, reflecting widespread concerns among investors.

Notably, Tata Motors, Adani Ports, Axis Bank, Bharti Airtel, and Reliance Industries emerged as key gainers on the Nifty, providing a semblance of relief amid the broader decline. Conversely, major losers included LTIMindtree, Power Grid Corp, HDFC Bank, Asian Paints, and SBI Life Insurance, with the latter drawing attention due to a significant dip in HDFC Bank shares following disappointing Q3 results.

HDFC Bank shares continued their downward spiral on January 18, extending the decline by over 3%, as the fallout from disappointing Q3 results rattled investors. The bank's US-listed shares had already suffered a substantial 9% drop overnight, reaching $55.5 – marking the steepest single-day decline since March 2020.

Over the past two days, the HDFC Bank ADR has experienced a significant 15% plunge, mirroring the domestic market sentiment where HDFC Bank stock recorded a substantial 10% dip. The troubles for the country's largest private lender began on January 17, when its shares plummeted over 8% to close at ₹1,536 after the release of lacklustre October-December quarter results for the fiscal year 2023-24.

Investor disappointment in the wake of the Q3 results created a domino effect, dragging down other banking stocks, particularly those of private sector lenders. The Bank Nifty index, reflective of banking stocks' performance, witnessed a sharp 4% decline, the steepest single-day fall since March 2022.

HDFC Bank, commanding a substantial weightage of over 14% in the benchmark Nifty 50 index, emerged as the major drag behind the index's decline. The bank's struggles were exacerbated by a key miss in net interest margins (NIM) during Q3FY24, attributed to elevated funding costs. Additionally, higher provisions and a decadal low in earnings per share (EPS) growth further fueled the decline.

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