IndusInd Bank's stock hit a 15% lower circuit on Tuesday following its disclosure of discrepancies in account balances related to its derivative portfolio. The bank, in a regulatory filing on March 10, 2025, informed stock exchanges about an internal review that highlighted inconsistencies in its Other Asset and Other Liability accounts.

Key Highlights from the Disclosure

• The discrepancies were discovered during an internal review post-implementation of the RBI Master Direction on Investment Portfolio Classification and Valuation, issued in September 2023.
• IndusInd Bank estimated an adverse impact of approximately 2.4% of its net worth as of December 2024, translating to a hit of nearly ₹2,000 crore.
• A reputed external agency has been appointed to independently review and validate the findings.
• The bank assured investors that its profitability and capital adequacy remain strong to absorb the impact.
• The bank mentioned that inter-desk swap accounting of FX hedges had a process flaw, leading to an understatement of costs.

Market Reaction

Following the disclosure, investors reacted negatively, triggering a sharp sell-off in IndusInd Bank's stock. The stock price hit the 15% lower circuit, leading to a trading halt. The market sentiment turned bearish, with investors worried about potential financial and regulatory repercussions. Stock is Trading at 2 yrs low

Fresh Market Fears

The revelation of a ₹2,000 crore hit to net worth has sparked concerns over the bank's risk management framework. Analysts fear this could lead to heightened regulatory scrutiny and potential rating downgrades if further inconsistencies emerge.

Analysts' Take

Morgan Stanley (MS) has given an Equal-Weight (EW) rating on IndusInd Bank, with a target price (TP) of ₹900. The firm noted that visibility on the stock continues to reduce due to the ongoing uncertainties.

Market experts believe the bank’s transparency in reporting the issue is a positive step, but concerns remain regarding the final outcome of the external review. If the impact is more significant than initially estimated, it could lead to further volatility in the stock

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