SBI Stock Plunges 7%: Evaluating the Investment Opportunity and Short-Term Risk Management Strategies

SBI Shares Plummet 7% Following Disappointing Q1 Earnings

State Bank of India (SBI) shares saw a significant decline of 7 percent on Friday after the country's largest lender reported March quarter earnings that fell short of market estimates. The decline was largely due to lower treasury income despite a healthy growth in core lending operations.

The stock hit a low of Rs 1,010.90 per share on the NSE before recovering some losses to settle at Rs 1,018.40, down 6.74 percent. This decline was a result of the bank's standalone net profit rising by only 5.6 percent year-on-year to Rs 19,684 crore for the January-March quarter of FY25, compared to Rs 18,643 crore in the year-ago period. However, this profit missed analysts' estimates of Rs 20,312 crore, according to Reuters-LSEG data.

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The bank's total income during the quarter declined to Rs 1,40,412 crore from Rs 1,43,876 crore in the corresponding period last year. The sharp decline in the stock prompted analysts to advise caution for short-term traders.

Analysts at Religare Broking and Motilal Oswal Financial Services have advised traders to exercise caution. According to Ajit Mishra, SVP-Research at Religare Broking, the stock may see further dip after this sharp fall and may find support around 970-990 zone. Ruchit Jain of Motilal Oswal Financial Services added that the near term trend for the stock seems sideways and the stock has not participated in the recent upmove in markets.

While credit momentum remained strong during the quarter, the Reserve Bank of India's curbs on forex arbitrage impacted banks' trading income, though some of the restrictions were later eased. Rising bond yields also weighed on lenders as higher yields reduce the value of their bond holdings.

In February, SBI had raised its credit growth forecast to 13-15 percent for FY26 from 12-14 percent earlier, citing broad-based growth across segments. The bank expects credit growth to remain in the 13-15 percent range in the current financial year as well.

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Growth in SBI's loan book, considered a bellwether for India's banking sector, is closely tracked for signals on broader economic trends in Asia's third-largest economy. The bank's asset quality improved during the quarter, with gross non-performing assets as a percentage of total loans falling to 1.49 percent at the end of March from 1.57 percent at the end of December and 1.82 percent a year earlier.