Demonetisation pulls bank stocks down

SBI falls by 4.8%, its biggest intra-day fall since 9 November. Bank of Baroda lost as much as 9.9% on Monday


The State Bank of India (SBI) stock climbed 11% in two days after the demonetisation announcement. However, it fell significantly on Monday.  Photo: Pradeep Gaur/ Mint
The State Bank of India (SBI) stock climbed 11% in two days after the demonetisation announcement. However, it fell significantly on Monday. Photo: Pradeep Gaur/ Mint

Mumbai: Shares of India’s big state-owned banks fell on the risk that the government’s recall of high-value currency notes will dent their profits.

State Bank of India, the nation’s biggest by assets, declined by as much as 4.8% on Monday, its biggest intraday fall since 9 November and the worst performance on the benchmark S&P BSE Sensex. Bank of Baroda lost as much as 9.9%.

The declines may signal that investors are reassessing the effect on banks of Prime Minister Narendra Modi’s unexpected 8 November move to withdraw Rs500 and Rs1,000 notes in a crackdown on tax evasion and the underground economy. Shares of lenders such as State Bank of India had jumped in the days after the decision.

“Banks are just exchanging money and not doing any lending for the past 10 days which will hurt their third-quarter performance,” Rakesh Kumar, an analyst at Elara Securities India, said by phone. “Margins for the next two quarters will take a hit.”

State Bank stock climbed 11% in two days after the demonetisation announcement. Bloomberg

More From Livemint