IndusInd Bank share price falls to a one-year low after RBI grants CEO only a single-year extension

This is the second consecutive time that the RBI approved a shorter tenure for Kathpalia than what the board proposed.

Shares of IndusInd Bank fell to a one-year low due to the Reserve Bank of India’s (RBI) decision to grant its CEO Sumant Kathpalia only a one-year extension instead of the three-year term recommended by the board.

Iinvestor sentiment has been tempered due to concerns over asset quality, particularly in the microfinance segment, and management stability. (Pixabay)

The share's intraday low as well as 52-week low on the Bombay Stock exchange (BSE) was ₹886.40, which was down by 5.4% from the previous close.

As of 1 pm IST, the bank's shares were trading at ₹905.80 on the BSE. This was a drop of 3.31% or ₹31.

This is the second consecutive time that the RBI approved a shorter tenure for Kathpalia than what the board proposed.

“This price drop was accompanied by a 12.1% surge in open interest, representing a two-month high of 5.36 million shares added,” Axis Securities wrote in its Daily Derivatives Insights report. “Since the series' inception, the stock has depreciated by 10%, while open interest has escalated by 14%, or 5.96 million shares.”

The brokerage added that “this correlation between price decline and increased open interest indicates a significant short build-up, demonstrating a persistent bearish sentiment in the stock.”

Kathpalia had led IndusInd Bank for five years, overseeing a strong recovery in its stock, which had more than doubled from ₹398 to ₹936 before recent declines, according to an Economic Times report.

However, investor sentiment has been tempered due to concerns over asset quality, particularly in the microfinance segment, and management stability.

IndusInd Bank's stock lost 42.45% over the last year year, 8.41% in the last three months, and 9.11% in the last week alone, according to the report.