Mumbai: Axis Bank’s recent share price decline has surprised many investors. There was no major negative surprise in the bank’s results, asset quality remained under control, and credit costs showed no immediate
risk. Despite this, the stock came under pressure. The main reason appears to be a changed message from management regarding NIM, or Net Interest Margin.
Why NIM matters?
NIM is the backbone of a bank’s earnings. It is the difference between the interest a bank earns on loans and the interest it pays to depositors. A rising NIM boosts profits rapidly, while a weak NIM slows profit growth. Investors closely watch NIM as it directly affects the bank’s earnings and growth outlook.
Axis Bank’s message disappointed the market
Axis Bank said that NIM will improve, but the improvement will be gradual. Management described this as a 'C-shaped recovery', expecting NIM to reach around 3.8 percent over the next 15–18 months. While guidance was not reduced, the timeline for recovery was pushed forward.
The market had expected NIM to bottom out quickly, with a sharper recovery by the end of FY26 or early FY27. The slower recovery implied limited profit growth in the near term and a delay in any significant jump in EPS. This led short-term investors and traders to book profits.
High valuation added pressure
Axis Bank shares had already seen a strong run-up and were trading at high valuations based on expectations of 'perfect execution.' When growth appears slower from elevated levels, investors naturally reduce risk, which added to selling pressure.
Neutral rating from Citi adds caution
Large brokerage Citi maintained a Neutral rating on Axis Bank, with a target price close to the current level. This signaled to investors that immediate upside was limited. While it did not create a reason for new buying, it gave an excuse for profit-taking.
Key takeaway for investors
The recent fall does not indicate that Axis Bank is in trouble or facing major risks. The main message is that profit growth will be slower and more gradual than investors expected. The market is now in a wait-and-watch mode rather than expecting quick returns.
