IndusInd Bank Share Price Crash of 18% Explained. Is It A Buy?
On October 25, 2025, investors of IndusInd Bank witnessed an unexpected market event. The bank’s share price crashed by ~18%. This significant drop left many analysts and investors scrambling to understand the underlying causes. Here’s a detailed look into the critical data from IndusInd Bank’s financial results that likely contributed to this sharp decline:Financial Performance OverviewNet Profit Decline: IndusInd Bank reported a substantial decrease in its net profit. The drop was significant enough to alarm investors, possibly due to higher provisions for bad loans. In Q2 FY25, the posted a PAT of Rs.1331.26 crore which is -38.7% lower than the Q1 FY25 quarter. On YoY basis, the PAT has contracted by -39.5%. It reported a PAT of Rs.2170.72 in Q2 FY24.Net Interest Income (NII): There was a minor increase in NII by 5% (YoY). In Q2 FY25, the NII is Rs.5,347 as compared to Rs.5,077 in Q2 FY24. It is sure that the growth of only 5% might not have met the market’s expectations. In the past, the bank’s growth have been good.Asset Quality IssuesThe bank’s asset quality seemed to have deteriorated. Both gross and net NPAs have increases in the current Q2 FY25 compares to QoQ and YoY NPAs.Gross NPA stands at 2.11% rose from 2.01% QoQ and 1.93% YoY.Net NPA is at 0.64% rose from 0.60% QoQ. In Q2 FY 24, the Net NPA was 0.57%This uptick in NPAs suggests a potential increase in loan defaults or downgrades. It is is a red flag for any banking institution as it impacts profitability through higher provisions.Provisions and ContingenciesThere was a notable rise in provisions as banks must compulsorily increase it if their Gross NPAs are increasing.This increase of provisions can cause a direct reduction in the net income and hence the EPS (Earnings Per Share).DescriptionSep ’24Jun ’24Sep ’23Provisions And Contingencies (Rs.Cr.)1,820.101,049.84973.81Gross NPA (%)2.112.021.93Net NPA (%)0.640.60.57Provisions Increase QoQ (%)73.4%––Provisions Increase YoY (%)86.9%––As compared to the last quarter (Q1 June’24), the provisions have increased by 73.4%. In Q1, the provisions stood at Rs.1,049.84 crores. A 73% jump in one quarter is alarming.As compared to the YoY quarter (Q2 June’23), the provisions have increased by 86.9%. In Q2 last year, the provisions stood at Rs.973.81 crores. A 86.9% rising in provisions is a definite reason for the market to get alarmed.This increase in provisions is attributed to concerns over loan recoveries (as gross NPA have risen considerably). These provisions act as a precaution against potential future defaults.It is a signal that points towards caution or emerging issues within the bank’s loan portfolio. Remember, we have seen situations like this with Yes Bank in the past.Market ReactionThe market’s reaction was swift and severe. It is an indicating a lack of confidence in the bank’s ability to manage its risks effectively. The significant stock price drop reflects investor concerns over the sustainability of the bank’s business model or its exposure to high-risk assets.Why this over-reaction? Yes, but there is a reason for it. As I told, investors have already burnt their fingers with investments like Yes Bank in the past.Similar banking related past examples like that of DHFL and IL&FS have made investors very defensive towards bank related bad news.Economic and Sectoral ContextThere seems to be a broader market nervousness which is amplifying the negative reactions to individual company results. Furthermore, talks about potential market corrections and economic policy uncertainties in India might have further exacerbated the sell-off.Other major banks like HDFC Bank and ICICI Bank have also experienced declines. But their declines are not as drastic.Is this a good or bad news for the shareholders of IndusInd Bank?Surely it is not a good news. But it is also true that income fall and asset quality decline can be a sector-wide concern. Whenever there is such a situation, temporary consolidation followed by gradual recovery is very likely.Future OutlookFollowing such results, analysts are quick to revise their price targets downwards. Most of the mutual funds, FIIs, and investment firms cannot digest such negative results. They dump such stocks and allocate the funds elsewhere. They have a pressure to report positive daily returns. Hence, they find solace in dumping than buying value stocks.So do I consider IndusInd Bank as a value stock? Yes, till now it is a Nifty 50 stock. Considering that it stays there in coming periods, such a massive -18% correction makes it a value buy (for me).Despite the immediate negative reaction, long-term investors can see value in IndusInd bank.I’m not predicting a rebound but if the bank addresses the underlying issues (NPA, fast growing provisions, falling PAT & EPS) effectively, the stock price will bounce back.However, the immediate aftermath is showing a clear loss of investor confidence.ConclusionThe 18% crash in IndusInd Bank’s share price on October 25, 2025, was a result of several intertwined factors:A significant drop in net profit due to higher provisions for bad debts.An increase in NPAs, suggesting deteriorating loan quality.Broader market sentiment possibly exacerbated by external economic factors and sectoral concerns.While these factors contributed to the immediate plunge, the long-term perspective for IndusInd Bank will depend on how it navigates these challenges. It must surely manage its asset quality and decrease the provisions if possible.We as investors might need to watch closely for any strategic shifts or management actions in response to these financial results to gauge future performance.This event serves as a stark reminder of how sensitive banking stocks can be to changes in financial health and external economic conditions.Have a happy investing.
