On December 16, the share price of Axis Bank fell more than 4%. This drop came after Citi Research issued a cautionary assessment about the bank’s net interest margin (NIM) forecast. Investor confidence has been impacted by Citi’s statement that the anticipated rebound in NIMs may be postponed from the current Q3 FY26 to either Q4 FY26 or Q1 FY27. With a target price of Rs 1,285 per share, Citi Research maintained its “Neutral” rating on Axis Bank, indicating merely a little gain from the previous closing price of Rs 1,284.8. Axis Bank shares dropped to an intraday low of Rs 1,231 during trading, which placed pressure on the banking index as a whole in the morning.
Citi’s assessment on Axis Bank’s performance
Business demand for the bank’s corporate loan division is improving, according to Citi. Due to pent-up demand, the retail loan sector is also rebounding, although the brokerage cautioned that the durability of this recovery requires careful monitoring.
Positively, Citi stated that personal loans are stabilizing and problems in the credit card industry are lessening. Additionally, export-focused micro, small, and medium-sized businesses (MSMEs) are demonstrating resilience; no significant stress indicators have been noted.
In terms of asset quality, Citi expects seasonal fluctuations in gross slippages in Q3, mostly because of agricultural cash credit (CC) and overdraft (OD) facilities. Although some volatility is anticipated, it should not be as bad as it was in Q1, which will reduce credit costs somewhat.
The NIM forecast is still under pressure.
Instead of the originally anticipated Q3 FY26, Citi has modified its projections for Axis Bank’s NIMs, projecting that margins would probably reach their lowest point in Q4 FY26 or Q1 FY27. Aiming for about 3.8 percent over the following 15 to 18 months, the management has projected a gradual, “C”-shaped recovery in NIMs.
The firm also said that, despite advancements in key lending sectors, Axis Bank’s present limited capacity to optimize its fee-to-asset ratio may constrain short-term profits growth.
Impact on Bank Nifty and other banking stocks
The Nifty Bank index, which dropped 0.6 percent to around 59,107.65 at 10:18 am, was primarily influenced by the drop in Axis Bank shares. Punjab National Bank (PNB), IDFC First Bank, Bank of Baroda, Canara Bank, and other significant banking equities all fell by around 1%.
AU Small Finance Bank, IndusInd Bank, Federal Bank, State Bank of India (SBI), HDFC Bank, Kotak Mahindra Bank, and ICICI Bank were among the other institutions that were trading down, but with smaller losses.
The Bank Nifty’s technical forecast
Technically speaking, the banking index is currently up against resistance around the 59,200 mark, according to Amruta Shinde, a Technical & Derivative Analyst at Choice Broking. While the 59,200–59,300 range is seen as a crucial support region, a persistent breakout above this level might result in an upward rise towards 59,700–59,800. Bank Nifty is still in a consolidation period, with a trading range of 58,700 on the downside and 59,750 on the upside, according to Dhupesh Dhameja, a Derivatives Research Analyst at SAMCO Securities. A lack of significant directional movement is indicated by momentum indicators, such as the RSI below 60.
Angel One, on the other hand, had a slightly optimistic view, pointing to resistance between 59,800 and 60,000 and support levels between 59,000 and 58,800.
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