Why Axis Bank Slumped 10% in Two Sessions

Axis Bank Shares fell nearly 6 per cent to a day low of Rs 553.35 on Wednesday making the private sector lender the top loser in the 50-share Nifty benchmark. Including Wednesday's fall, Axis Bank is down over 10 per cent in the last two sessions.

Between January 16, when it reported its December quarter earnings and February 2, Axis Bank shares rallied over 20 per cent. Its net profit of Rs 1,900 crore beat Street estimates, while asset quality remained stable in the December quarter.

The sharp run up in shares sent Axis Bank's valuations higher. An analyst with a top brokerage said Axis Bank traded at a 15 per cent premium to ICICI Bank's valuation, which has never happened before.

Axis Bank and ICICI Bank have been trading at similar valuations historically as they have similar kind of loan book. Like ICICI Bank, Axis Bank has a large exposure to the infrastructure sector, said the analyst.

Moreover, ICICI Bank have shares have corrected nearly 11 per cent in last three sessions after the private lender said its net non-performing assets increased 18 basis points sequentially to 1.27 per cent in the December quarter.

Analysts believe Axis Bank can also witness similar deterioration in asset quality in the coming quarters, so the premium valuation is not justified.

Shares in Axis Bank ended 4.45 per cent lower at Rs 560.50 apiece, underperforming the broader Nifty, which closed down 0.38 per cent.