Indian banks which had exposure to the embattled Adani Group posted worst declines in their market capitalisation in the January-to-March quarter of 2023, according to a note by S&P Market Intelligence.

This followed the US-based short seller Hindenburg’s report which alleged the Adani Group of engaging in “brazen stock manipulation and accounting fraud”. These charges were denied by the Adani Group.

Of the top 20 Indian banks by market cap, 17 registered a decline, including those with no stated exposure to the Adani Group.

Among the banks that lost the most market cap in the top 10, Bank of Baroda and Axis Bank saw fall of 9.07% and 8.02%, respectively.

Punjab National Bank fell two spots to 10th place on S&P Global Market Intelligence's ranking of India's largest banks by market cap. The market cap plunged 17.45% in the first quarter to $6.25 billion, the biggest decline among the top 10 banks. 

State Bank of India, the nation's biggest lender by assets, suffered a 14.66% fall, followed by IndusInd Bank with a 12.42% slump in its market cap.

During the January-to-March quarter of 2023, the benchmark Sensex fell 3% while Nifty 50 declined 4.1%. Nifty Bank Index fell 5.5%. The stock markets have recovered somewhat in recent weeks, though investors remain worried about the high leverage of the Adani Group and its potential impact on India's banks, the note said.

SBI, IndusInd Bank, and Axis Bank had then disclosed that their exposure was below 1% of total advances whereas Bank of Baroda said its exposure is 25% of the RBI’s prescribed limit.

“Based on the financial metrics of banks with known exposure to the Adani Group, industry experts believe that any fallout from the Group’s troubles does not pose any significant credit risk to the Indian banking sector,” S&P said.

While the market cap of Indian Overseas Bank and Central Bank of India remained the same in the quarter ended 31 March compared to the quarter prior, Indian Bank's market cap rose marginally by 1.1% to $4.38 billion.

HDFC Bank Ltd. retained its top spot as the largest Indian bank by market cap, followed by ICICI Bank Ltd. and State Bank of India.