Chapter 9

The slide

For a stock that spent two decades being the market's default answer, the years after the merger were a quiet re-education: single-digit returns, then negative ones, then a chairman's resignation that erased ₹1 lakh crore in a morning.

The first sign was relative, not absolute. In 2024 the stock rose about 6% - a ninth consecutive positive year, as CNBC-TV18 noted - but three of the last four years had been single-digit and mostly behind the Nifty 50. Mutual funds and retail investors trimmed their stakes in the December 2024 quarter even as foreign investors added.

The MSCI reprieve and the bonus

August 2024 brought mechanical relief: MSCI raised the bank's weight in its global standard index in two tranches, lifting the foreign inclusion factor from 0.37 to 0.56, with an estimated USD 1.8 billion of passive inflows in the first tranche alone, per the MSCI announcement and ET's reporting. The stock still fell 3% that day - the inflow was smaller than the market had hoped.

On 19 July 2025, the board approved a 1:1 bonus issue, record date 27 August 2025, doubling the share count, per the bank's exchange filing. (Share prices in this chapter are as reported on their dates; the bonus halves comparability across it.)

Then 2026

After chairman Atanu Chakraborty's resignation in March 2026 - Chapter 11 - the stock fell 12% in three sessions and intraday market-cap erosion briefly touched ₹1 lakh crore; the New York-listed ADRs fell about 5% and then another 4%, as ET reported. By 24 July 2026 the stock was down about 25% for the year, with one-year returns of -26% and three-year returns of -12%, per ET Markets. On 31 August 2026 it hit a 52-week low of ₹704.40, 28% down for the year, as The Hindu reported. In late September it traded near ₹731, per Business Today.

The bull case never disappeared. Analysts quoted through the falls called it "deep value" and "cyclical execution pressure rather than structural leadership failure." The bears pointed to the same numbers in the previous chapter: a bank that had to slow its own growth to digest its own merger.

The default answer

To grasp what the slide meant, you have to grasp what preceded it. For two decades, this stock was the Indian market's default answer - to the question foreign funds asked about India, to the question domestic savers asked about banks, to the question advisors asked about compounding. It did not need to be argued for; it needed to be owned, and owning it was the argument. That status was earned, as the earlier chapters document: real growth, real discipline, real returns. But a default answer carries a hidden fragility. Its valuation embeds not performance but certainty about performance - the premium is paid for the absence of doubt. The years this chapter covers are the years doubt arrived, one filing at a time: a ratio that had to be repaired, a margin that compressed, a growth engine deliberately throttled, a chairman who walked out over values, a chief executive's term ending amid an FIR, a fraud probe and a class action. None of it existential. All of it priced.

2024: the grudging green

The shareholding data from the December 2024 quarter, analysed by CNBC-TV18, is a portrait of a market quietly re-ranking its favourite. The stock gained 2.3 per cent in the quarter and about 6 per cent for the year - a ninth consecutive positive year. And yet: three of the previous four years were single-digit, mostly behind the Nifty 50. India's domestic mutual funds trimmed their stake by 60 basis points to 23.93 per cent. Retail investors - the 38-lakh-strong small-holder base that was this stock's original congregation - trimmed by about 40 basis points to 10.8 per cent, and their headcount fell. The buyers were foreign portfolio investors, up a percentage point to 49.3 per cent. Read that rotation carefully: the local believers were cashing the stock out to foreign institutions buying it as an emerging-market allocation. The default answer was becoming somebody else's trade.

The passive bid

The August 2024 MSCI decision was the purest illustration of what now held the stock up. The index provider raised the bank's weight in its global standard index in two tranches, lifting the foreign inclusion factor from 0.37 to 0.56, per the MSCI announcement and Economic Times reporting - an estimated USD 1.8 billion of passive inflows from the first tranche alone, and close to USD 4 billion across both, per later tallies. Four billion dollars of mechanical buying - and the stock fell 3 per cent the day the first tranche landed, because the inflow was smaller than the market had hoped. When a bank's share price needs index arithmetic to hold its level, and drops anyway, the market is telling you something about the organic bid underneath. The machine's stock was now, in part, a function of index mechanics - the least romantic sentence ever written about the franchise that once defined Indian equity romance.

The bonus and the message

On 19 July 2025, the board approved a 1:1 bonus issue - one free share for every share held, record date 27 August 2025 - per the bank's exchange filing. Bonus issues create no value; they split the same pie into more pieces. What they do is signal - confidence, accessibility, a gesture to the retail base. In the context of this chapter, the gesture reads precisely: the institution that had lost part of its small-holder congregation was reaching back toward it, with the oldest gesture in the Indian market's book. The arithmetic of this dossier respects the split: share prices here are as reported on their dates, and the bonus halves comparability across it.

The morning a chairman cost a lakh crore

The slide's punctuation mark came on a single event, and the market's reaction is the most honest sentence in this chapter. When chairman Atanu Chakraborty resigned in March 2026 - the letter, the values-and-ethics language, the boardroom detail all in Chapter 11 - the stock fell 12 per cent in three sessions. Intraday market-capitalisation erosion briefly touched ₹1 lakh crore. One lakh crore, in a morning, over the departure of a part-time chairman. The New York-listed ADRs fell about 5 per cent, then another 4 per cent, as the Economic Times reported. Markets do not price departures; they price what departures reveal. A chairman leaving over "values and ethics," in a letter that said the merger's benefits had yet to fully fructify, repriced the one thing the franchise had always sold: certainty about what was going on inside.

2026: the repricing

The year that followed kept the theme. By 24 July 2026 the stock was down about 25 per cent for the year, with one-year returns of minus 26 per cent and three-year returns of minus 12 per cent, per ET Markets - the same report carrying the news that three US law firms had launched probes over alleged federal securities-law violations, the class action that Chapter 15 examines. On 31 August 2026 the stock touched a 52-week low of ₹704.40, down 28 per cent for the year, in the same stretch where Moody's was calling the chief executive's decision to retire a "leadership transition risk," as The Hindu reported. By late September it traded near ₹731, per Business Today. Line the dates up with the rest of the book and the slide stops looking like a market event: it is the cumulative price of every other chapter - merger indigestion, boardroom crisis, an FIR naming the CEO, a fraud probe, succession uncertainty - expressed in the only language that never needs translation.

The bull case, seriously

Honesty requires the other side, and the other side is not weak. The bank remained India's largest private lender and the second-largest overall, with FY25 profits of roughly ₹67,347 crore, asset quality that stayed among the best in the system, and a deposit-repair programme delivering exactly what management promised - the credit-deposit ratio back below 100 per cent and guiding lower. Analysts quoted through the falls called the stock "deep value" and the pressure "cyclical execution rather than structural leadership failure." Foreign portfolio investors kept buying through 2024. The franchise's core assets - the customer base, the distribution, the brand, the cross-sell machine - were intact. If the merger finishes digesting, if the succession lands cleanly, if the supervisory file thins, the re-rating case writes itself. That is not nothing. It is, in fact, the case that has kept ₹700-plus under the stock through everything this dossier documents.

The bear case, seriously

And the bear case is equally concrete, because it is made of the same facts read forward instead of back. The growth premium died of arithmetic, not sentiment: a bank that must grow loans at 3 per cent to repair its funding cannot command a growth multiple. The governance discount is not sentiment either: a chairman's values-and-ethics exit, an FIR naming the sitting CEO, a securities class action and three law-firm probes are line items, whatever their eventual outcomes. The succession question is unresolved as this book publishes, with the regulator holding the decision. And the culture questions - the pressure chapters, the commissions engine, the forensic audits - sit underneath all of it, unpriced because unquantified, the way such things are until the day they are not. The bears' deepest point is the simplest: the stock's twenty-year premium was a certainty premium, and certainty, once spent, is the hardest asset to rebuild.

What the slide prices

So end where the market ends. The slide is not a verdict that the bank is broken - the deposit repair, the profits and the franchise say otherwise. It is a verdict that the story changed. For twenty years the market paid this institution for predictability, and the institution delivered it so reliably that the premium looked like a law of nature. The years since the merger have repriced the institution as what it actually now is: a very large, very solid, very complicated bank, working through a difficult digestion, under a brighter regulatory light than it ever asked for, with questions open at the top of its house. Solid banks trade at solid prices. The slide, in the end, is the sound of a premium becoming a price. The chapters that follow document the events that kept pushing it there.

The anatomy of a de-rating

De-ratings of this size are never one event; they are a sequence, and this one's sequence is worth setting down in order. First, the structural leg: the merger's arithmetic - a 110 per cent loan-to-deposit ratio, a 3.35 per cent margin, growth deliberately throttled to repair the funding - removed the earnings trajectory the premium was built on. Second, the ownership leg: domestic mutual funds and the retail congregation quietly reducing, foreign institutions replacing them, the shareholder base becoming less congregation and more allocation. Third, the mechanical leg: index weight changes providing the marginal bid, passive flows substituting for conviction. Fourth, the governance leg: a chairman's values-and-ethics exit, an FIR naming the sitting chief executive, a fraud probe, a class action, three law firms circling. Each leg alone was explainable. Together they converted the market's oldest certainty into its newest question mark, and the price followed the conversion. The franchise, note, did not shrink through any of it - deposits, branches, customers and profits all grew. What shrank was the market's willingness to pay in advance for the next decade of the story. That is what a de-rating is: not a fall in what a company is, but a fall in what investors will prepay for what it might become.