IndusInd Bank Comes Under NSE’s Short-Term ASM Surveillance After Derivatives Loss Disclosure
Move comes as stock sheds 25% post derivatives disclosure; SEBI expected to probe potential insider trading.
Shares of IndusInd Bank have been placed under short-term additional surveillance measure stage 1 by the National Stock Exchange, as per a circular issued on Thursday. This regulatory action, aimed at protecting investors and preserving market integrity, comes in the wake of the bank’s recent disclosure of accounting discrepancies in its derivatives portfolio.
Under the short-term ASM framework, the applicable margin rate on trades will be 100% or existing margin, whichever is higher, subject to a cap of 100%, effective from coming Tuesday, March 18, on all open and new positions.
The exchange’s move is intended to closely monitor the stock amid high volatility and prevent speculative trading, especially as IndusInd Bank’s shares have come under significant pressure since the lender disclosed that discrepancies in its derivatives book amounted to 2.35% of its net worth as of December 2024.
The stock has declined over 25% since Monday’s announcement and closed 1.8% lower on Thursday at Rs 672.35 on the NSE, marking its fourth consecutive session in the red.
Regulatory Scrutiny Intensifies
Following the bank’s disclosure, multiple regulators have started examining the matter. According to people familiar with the development, the Securities and Exchange Board of India is likely to launch a preliminary inquiry into possible understatement of derivative losses and potential unfair trade practices.
SEBI is expected to scrutinise discrepancies in the bank’s accounting of derivative trades and probe possible insider trading, after reports suggested that some insiders may have sold shares upon learning of non-public information.
A person with direct knowledge of the matter told NDTV Profit that these misreported losses may constitute violations of SEBI’s disclosure and listing obligations, and if insider trading is confirmed, would breach SEBI’s Prohibition of Fraudulent and Unfair Trade Practices regulations.
The Reserve Bank of India is also closely monitoring the situation, as the bank’s review follows RBI’s September 2023 guidelines on bond investment categorisation and valuation. IndusInd Bank has already appointed an external agency to independently review and validate its findings, with the final report awaited.
Analysts Cut Targets, Flag Risks
The uncertainty around the quantum of derivative losses and potential regulatory action has led several brokerages to downgrade the stock or slash target prices.
Citi maintained a ‘buy’ rating but cut the target price from Rs 1,350 to Rs 1,160.
Nuvama downgraded the stock to ‘reduce’ from ‘hold’, lowering the target price to Rs 750.
Emkay downgraded to ‘add’ from ‘buy’, cutting the target price to Rs 875 from Rs 1,125.
Jefferies maintained ‘buy’, but reduced the target price from Rs 1,080 to Rs 1,040.
UBS kept a ‘sell’ call and reduced the target price from Rs 850 to Rs 770.
CLSA also issued a steep cut, slashing the target price from Rs 1,300 to Rs 900, while retaining an ‘outperform’ rating.
Twenty one out of 38 analysts tracking IndusInd Bank still have a ‘buy’ rating, while eight recommend holding and nine suggest selling, as per Bloomberg data. The 12-month consensus target price stands at Rs 1,024.12, implying a potential upside of over 52% from current levels.
