Kotak Mahindra Bank was among major gainers on NSE today after the private sector lender reported lower net profit and interest income. Kotak Mahindra Bank declined 7.3 percent. IndusInd Bank, Axis Bank and Bandhan Bank were among other banking stocks that faced selling pressure. Bajaj Finance shares were also trading under pressure as selling intensified in some of the financial services stocks. TopNews has reviewed technical levels for these stocks. As per market experts, Kotak Mahindra Bank could face further selling pressure.

Kotak Mahindra Bank: Margin Pressures and Market Disappointment

Kotak Mahindra Bank’s first quarter results for FY26 underscored the challenges posed by an adverse interest rate backdrop and rising credit costs. The lender’s standalone net profit contracted by 7% year-on-year to ₹3,282 crore, and consolidated net profit declined even more sharply to ₹4,472 crore, sharply trailing the prior year’s ₹7,448 crore performance—a figure that was propped up by an exceptional gain from the earlier sale of its general insurance stake. The miss relative to market expectations triggered a heavy sell-off, causing the stock price to plunge roughly 7% in a single session and pulling down the market capitalization to ₹3.93 lakh crore.

The root causes are multifaceted:

Net Interest Margin (NIM) Compression: The NIM narrowed by 37 basis points to 4.65%, largely reflecting the impact of the Reserve Bank of India’s repo rate cuts—about 60% of Kotak’s loan book is repo-linked. Meanwhile, funding costs proved sticky, compressing margins further.

Asset Quality Concerns: Provisions and credit costs jumped, with net slippages worsening to 1.3%, up from 0.9% a year ago. Stress in microfinance and commercial vehicle retail portfolios persists.

Analysts reacted decisively. Investec downgraded the stock from Buy to Hold and trimmed their price target to ₹2,275, citing the twin drags of margin squeeze and elevated credit costs, and cut FY26/27 EPS forecasts by 6-7%. Antique Stock Broking also marked down future earnings and valuations, although it retained its BUY stance with a lowered target of ₹2,440.

Management pointed to monetary policy as the key culprit, with more than 60% of assets tied to the repo, exposing NIMs to external shifts. The fall in CASA ratios and persistent stress in microfinance will likely keep margins and asset quality under pressure moving forward.

In terms of stock performance, Kotak experienced severe volatility—oscillating between a 52-week high of ₹2,301.55 and a low of ₹1,679.10. Though the stock managed a 10% uptick over the past year, the last month erased nearly 8% of shareholder value.

Bajaj Finance: Growth Engine Faces Asset Quality Scrutiny

Bajaj Finance delivered a strong headline growth performance in Q1 FY26, with a standalone net profit advancing 22% YoY to ₹4,133 crore and assets under management surging 24%. The company impressively added 4.7 million new customers and issued 13.5 million new loans for the quarter.

However, the celebration proved short-lived as the market turned its spotlight to the softening in asset quality:

The gross NPA ratio increased to 1.03% (up from 0.96% sequentially and 0.86% YoY).

Loan losses and provisions escalated by 26% YoY.

These factors, especially concerns in the MSME and vehicle loan books, led to a sharp sell-off of 4.7% in shares—the steepest in three months.

Credit costs swelled to 202bps, exceeding the targeted band of 185–195bps.

Analysts, in turn, recalibrated their stances:

UBS rated the stock ‘Sell’ with a reduced target price of ₹750, pointing to MSME stress.

JP Morgan switched to ‘Neutral’ (target ₹970), highlighting emerging risks and forecasting possible earnings downgrades.

Bernstein remained cautious with an ‘Underperform’ stance (target ₹640), citing elevated credit costs.

Jefferies offered a counterpoint, reaffirming a ‘Buy’ and raising its target to ₹1,100 on the back of strong AUM growth projections, albeit with some downward revisions to forward earnings.

Emkay Global advised investors to ‘Add’ at a revised target of ₹1,000, viewing near-term returns as potentially muted due to the rich valuations.

Despite robust growth in headline metrics and sector-leading return on equity, Bajaj Finance’s immediate story pivots to effective credit cost containment. Management’s assurances that costs will remain within revised guidance were met with skepticism, reflecting worry over how high-yield products might fare in a tougher cycle. The stock remains volatile, dipping below the psychologically significant ₹900 mark.

The bull narrative is fueled by ongoing customer acquisition and a robust loan pipeline, while the bear case centers on potential asset quality rot spreading further in core high-yield portfolios.

IndusInd Bank: Governance Shock and the Road to Recovery

Few stories in financial circles have been as dramatic in 2025 as IndusInd Bank’s multi-faceted crisis. As the market braces for Q1 FY26 results, expectations are dismal: analysts predict a 65%–91% year-on-year plunge in quarterly profit, a direct fallout from the derivatives trading scandal that rocked Q4 FY25.

The anatomy of the crisis:

The bank posted a net loss of ₹2,329 crore in Q4, stemming from years of compounding derivatives errors uncovered by a forensic Grant Thornton investigation, pegged at a total impact of ₹1,960 crore.

Leadership disruption followed: both CEO and Deputy CEO exited in April amid widespread scrutiny, further destabilizing the lender’s franchise.

The aftermath saw share prices dive over 30% in March. While there was some rebound, July brought renewed pressure, eroding more value. On July 28, shares stood at ₹802, down 6.61% for the week, and far below sector averages. Market capitalization has receded to ₹62,484 crore.

Elevated provisioning due to stressed microfinance exposures and legacy risks is choking profitability. Net interest income for Q1 is expected to fall 22–25% YoY, with only a modest improvement in margins unlikely to counteract the drag from provisioning.

The recovery outlook is daunting. S&P Global warned in June 2025 that it could take two years to restore normalized earnings, as the bank works through the legacy of risk management lapses.

Strategically, IndusInd is mounting an effort to rebuild its capital base, aiming to raise ₹20,000 crore in debt and another ₹10,000 crore through equity deals—including possible Qualified Institutional Placements (QIPs), American Depository Receipts (ADRs), or Global Depository Receipts (GDRs). Such moves are positioned as essential for bolstering customer trust and fortifying the balance sheet. However, uncertainty persists as leadership vacuums, provisioning overhang, and the imperative for transparent succession all cloud the bank’s path to recovery.

Comparative Stock and Analyst Performance

Strategic Takeaways for Investors and Outlook

The July 2025 results and ensuing market reaction offer a stark lesson in the complexity of navigating India’s evolving financial sector. For investors:

Kotak Mahindra Bank faces sustained medium-term pressure in a challenging margin environment, making near-term re-rating unlikely until credit costs stabilize.

Bajaj Finance remains a growth bellwether, but investor focus will be on management’s competence in handling rising NPA pressures and credit costs in historically resilient but now increasingly vulnerable MSME and unsecured loan segments.

IndusInd Bank stands at a strategic crossroads: the coming quarters will test its ability to rebuild trust, strengthen capital, and restore strong, transparent governance.