Bank Nifty fell 1.6% on June 20 after heavyweight private banks declared mixed June quarter results.

Shares of HDFC Bank fell 5% on June 20 after analysts flagged a sharper-than-expected decline in margins, overshadowing steady loan growth and stable asset quality in the lender's June-quarter results. The top private lender reported a modest 5% rise in the June quarter profit over the weekend.

At 9:45 am on July 20, the sectoral index was trading 1.5% lower at 57,578.25 with HDFC Bank, Axis Bank leading the losses by falling 5?ch. Shares of Kotak Mahindra Bank and Yes Bank fell 3?ch.

Country's second-largest private lender, ICICI Bank, reported higher-than-expected earnings for the June quarter, driven by stronger loan demand ?and lower provisions for bad loans.

Kotak Mahindra ?Bank and Axis Bank also reported better-than-expected ?results, while country's largest private ?lender HDFC Bank's earnings met analysts' expectations.

Jefferies said ICICI ?Bank surprised positively, followed by Kotak ?Bank and Axis ?Bank, while HDFC Bank's earnings were relatively weaker.

"For Bank Nifty, the short-term structure continues to remain positive, with the 20-day SMA near 57,800 acting as the immediate support. As long as the index holds above this level, it has the potential to move towards the 59,000-60,000 range. However, a breach below 57,800 could make the ongoing uptrend vulnerable and warrant a more cautious approach," said Shrikant Chouhan, Head Equity Research, Kotak Securities.

HDFC Bank's loans and deposits grew about 15.4% and 13.3%, respectively, and profit rose 5%. However, net interest margin, a key gauge of lending profitability, was at 3.26%, below the 4% level seen before the bank merged with its parent HDFC in 2023.

"HDFC Bank was relatively weaker" among major private lenders this quarter, Jefferies said, noting that its push into faster-growing corporate loans came at the cost of margins.

Citi said softer fee income and weaker-than-expected net interest income prompted it to trim its fiscal 2028 earnings estimates by 1%-2% for HDFC Bank.

Analysts expect margin pressure to continue in the current quarter before easing later in the fiscal year as funding costs moderate.

ICICI Bank, which analysts described as the sector's strongest performer, rose 1?ter an earnings beat, with J.P. Morgan citing stronger NII growth, margin resilience and robust asset quality. The stock was the top gainer on the private bank index.

The results underpin a common trend across private lenders with loan growth remaining strong, driven by demand from corporate and small and medium enterprises, but margins remain under pressure as banks compete for deposits and absorb higher funding costs.

Loan growth among major private banks remained in the 15%-20% range during the quarter, according to Jefferies.

"Among the banking majors, ICICI Bank has reported stellar set of numbers with excellent all round performance. Kotak Bank, too, has reported very good results. HDFC Bank has disappointed, particularly on the NIM front," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.