The banking shares are under pressure on second day in a row after the global credit rating agency Moody’s Investor Service cut the standalone rating of India’s largest public sector bank, State Bank of India (SBI) due to concerns over capital and rapid deterioration in asset quality.
The agency cut its rating on SBI’s financial strength to D+ from C- and lowered its hybrid debt rating on the bank to Ba3 from Ba2, following the reduction in financial strength rating.
Analysts expect the downgrade to make SBI’s overseas borrowing a costly affair and affect other banks as SBI is seen as a representative of the Indian banking system.
The Bombay Stock Exchange (BSE) banking index Bankex hit a 18-month low and is down almost 2% to 10,028, compared to around 1% gain in the benchmark index Sensex.
Among individual stocks, ICICI Bank is down more than 3.2% at Rs 775, its lowest since January 2010.
SBI has shed another 3% to Rs 1,731 after declining 4% in the previous session. The stock has more than halved from its 52-week high of Rs 3,515 touched on November 8, 2010.
Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, IndusInd Bank and Federal Bank are down 1-3% on the BSE.