The stock market opened on a weak note, and the Sensex slipped more than 500 points in early trade. The heaviest pressure fell on the banking sector, where several heavyweights tumbled. Right after their quarterly results, HDFC Bank dropped as much as 5 percent, Axis Bank fell close to 5 percent and Kotak Mahindra Bank lost about 3 percent. Yet in the middle of all this selling, ICICI Bank stood out as the lone name glowing in the green. It was trading roughly one percent higher on the NSE at Rs 1,455. With the entire sector under strain, this rally left the market puzzled.
Why the big bank stocks cracked
Two big reasons sat behind the fall in these banking giants. The first was mounting pressure on their margins, and the second was a slip in asset quality. That is exactly where investors grew nervous and began booking profits. Axis Bank fell about 4.89 percent to Rs 1,264. Its core earnings may have held up reasonably well, but the net interest margin easing to 3.46 percent was hardly comforting. Kotak Mahindra Bank also slid 3.07 percent to Rs 377.90. HDFC Bank, meanwhile, had already broken as much as 5 percent after its Q1 numbers.
How ICICI Bank flipped the script
ICICI Bank, on the other hand, delivered a first quarter that comfortably beat market expectations. Its loan growth was the fastest in the sector, and it handed out more credit than its rivals. On top of that, the bank's net interest margin improved, its fee income climbed and its asset quality strengthened considerably. This solid foundation is exactly why both investors and brokerages are backing the stock and see room for healthy gains ahead.
Brokerages turn bullish with big targets
After the strong numbers, leading brokerage houses are smitten with the ICICI Bank stock. Nomura kept its buy rating intact and set a target price of Rs 1,700. Bernstein handed out a market perform rating with a target of Rs 1,550. Brokerage firm Prabhudas Lilladher also advised investors to put money into the stock, pegging its target price at Rs 1,850. The overall picture is clear, the very worries over margins and asset quality that dragged down the other banks are the areas where ICICI Bank showed strength, letting it break away from the crowd.
