Private bank stocks slump up to 21% in one month, but Gurmeet Chadha sees value. Here's why

Private bank stocks in India have faced significant declines over the past month, with some experiencing drops of up to 21%. Despite this downturn, market expert Gurmeet Chadha maintains that there is substantial investment value in these banking stocks. He highlights a crucial transition within the sector from the Loan-to-Deposit Ratio (LDR) to the Liquidity Coverage Ratio (LCR), which may enhance credit availability by 3% to 7%. Chadha points out that leading private banks like HDFC and ICICI are currently trading at favorable price-to-earnings ratios and book values, suggesting they are undervalued. The Nifty Private Bank index has fallen over 10%, outpacing the broader Nifty index's 8% decline. Individual banks have seen varying levels of impact, with IDFC First Bank leading the losses at 21%. Conversely, Bandhan Bank is the only stock in the index to record gains, increasing by 5%. In the public sector, banks have also faced challenges, with many experiencing single-digit declines, although a few have managed minor gains. Overall, while the near-term outlook remains pressured due to foreign institutional investor selling, Chadha’s analysis indicates a potential recovery for the sector in the longer term.