HDFC Bank is down in the red currently. Looks like it’s almost altruistic gesture of cutting rates has not gone down well with the market. The stock opened slightly weaker and went down at one point to Rs.1004.50, down over 2% and currently hovers around Rs.1008.

After the Q1Fy16 GDP numbers yesterday, probably in a move to transmit earlier rate cuts to people and to encourage lending by bringing down rates, in a surprise move, HDFC Bank announced a 0.35% cut in its base rate to 9.35%. This is effective from tomorrow, 2^nd Sept.

RBI has cut 0.75% rate till date and very few banks have actually transmitted this to the people. But HDFC Bank has been an exception. Like RBI, it too cute rate thrice and the total rate cut is at 0.65% till now. Base rate is directly linked to cost of funds for the bank. With cost of funds coming down, HDFC Bank felt that there is enough space for this 0.35% rate cut.

This rate cut by HDFC Bank is sure to put pressure on other banks to bring down rates. The market is worried that this cut could affect the margins of the Bank and hence not happy with this move of HDFC Bank.

Strange are the ways of the market indeed – it wants RBI to slash rates but when a Bank does cut rates, without a preempt from RBI, instead of applauding its move, it is punished by pushing the stock price into the red