IndusInd Bank has experienced a significant decline in its stock price, falling more than 38% over the past six consecutive sessions. The sharpest drop came on Tuesday when the stock plunged by 27%, marking its worst trading session in history. On Wednesday, the stock continued its downward spiral, falling another 7% to reach a fresh low of ₹605.40 on the BSE.
Accounting Discrepancies Trigger Investor Panic
The sharp decline follows the bank’s disclosure of accounting discrepancies related to its forex derivatives transactions. IndusInd Bank’s internal review has estimated a one-time adverse impact of approximately 2.35% on its net worth. Given that the bank’s net worth stood at ₹67,100 crore as of December 2024, this translates to an estimated financial hit of ₹1,577 crore post-tax and ₹2,100 crore pre-tax.
Root Cause: Forex Trade Accounting Errors
The root cause of the stock’s downfall lies in the bank’s failure to accurately account for past forex trades. The issue surfaced after the Reserve Bank of India’s new regulations required a reassessment of the bank’s “Other Asset and Other Liability” accounts. Analysts have suggested that the problem originated from low-liquidity internal trades involving swaps on 3/5-year yen and 8/10-year dollar borrowings. There are concerns that the bank failed to report the losses from these transactions, which has raised red flags about its transparency and internal controls.
Brokerages Downgrade Stock Amid Governance Concerns
Investor confidence has been further shaken by multiple brokerage downgrades. Several firms, including Motilal Oswal, Jefferies, Nuvama, and Emkay Global, have lowered their ratings on IndusInd Bank, citing concerns about corporate governance and potential regulatory scrutiny. Jefferies labeled the issue as a failure of internal controls and warned that it could lead to a valuation derating, particularly due to the expected impact on the bank’s FY25 earnings.
Uncertainty Over Leadership Adds to Market Jitters
Adding to the uncertainty is the leadership situation at the bank. The Reserve Bank of India extended the tenure of CEO Sumant Kathpalia for only one year instead of the usual three, raising speculation that the central bank has concerns about his leadership. Kathpalia himself admitted that the RBI may have had reservations about his management abilities. To address the crisis, IndusInd Bank has engaged PwC India for an external forensic review, with the findings expected by the end of March. Until the audit results are released, investor sentiment is likely to remain cautious.
Stock Breaks Key Support Levels, Experts Advise Caution
The stock has also breached key technical levels, with analysts noting that the support lies in the ₹580-₹600 range, while resistance is at ₹770-₹800. The stock has witnessed a structural breakdown, and experts advise a cautious approach. Traders are being urged to avoid fresh positions until more clarity emerges, with a “sell on rise” strategy being recommended.
IndusInd Bank’s Worst Trading Day on Record
On Tuesday, IndusInd Bank’s stock closed at ₹655.95, marking a 27.17% decline in a single session, its worst-ever trading day. This massive plunge erased nearly ₹19,052 crore from its market capitalization. Over the past six months, the stock has lost more than 50% of its value and is down 32% since the beginning of 2025.
Will IndusInd Bank Recover? Key Factors to Watch
For IndusInd Bank to regain investor confidence, several factors will play a crucial role. The findings of the PwC audit will determine the extent of the accounting discrepancies and whether further financial hits are expected. The leadership situation, including RBI’s stance on Kathpalia’s role, will also be a critical factor. Investors will be closely monitoring any regulatory actions and governance reforms that could reassure the market and restore stability. Until these issues are resolved, the stock is likely to remain under pressure, and uncertainty will continue to weigh on IndusInd Bank’s performance.
