Shares boomed as soon as RBI took action on Kotak, huge fall of 12%, what should investors do?

There has been a huge fall in the shares of Kotak Mahindra Bank. After the action of RBI, investors are scared about Kotak Mahindra Bank. The response of the stock market is also similar. So is there really a need to panic? Let us understand...

The effect of the action of the Reserve Bank of India (RBI) against the private sector Kotak Mahindra Bank is directly visible on the share price of the bank. When the stock market opened on Thursday, the shares of Kotak Mahindra Bank fell drastically. A direct decline of up to 12 percent was recorded.

Kotak Mahindra Bank shares opened at Rs 1675 on Bombay Stock Exchange (BSE) with a declining trend. But soon a deep crisis began to appear. It fell by 12 percent and reached the price of Rs 1620. In this way, this is a record fall in the shares of Kotak Mahindra Bank in a day.

However, after some time, improvement was seen in the shares of Kotak Mahindra Bank and it went up to Rs 1689. At 11:30 am, its price was at Rs 1658.20 with a decline of 10 percent.

Do investors need to be afraid?

The Reserve Bank of India (RBI) has banned opening new accounts and issuing new credit cards through online and mobile banking of Kotak Mahindra Bank. If we look at this incident broadly, it has not only created a negative perception in the market about Kotak Mahindra Bank, but it will also impact the business.

If the bank does not add new customers nor issue credit cards, it will affect its growth. Not only this, it will also affect its interest income (Net Interest Margins). Therefore, many brokerage firms have started reducing the target price for the shares of Kotak Mahindra Bank.

One reason for this is that Kotak Mahindra Bank had depended itself more on the online medium to add new customers. Anyway, RBI's action has affected the prospects of Kotak's share price in the short term and medium term.

The target price of Kotak Mahindra Bank shares has now been reduced from Rs 2050 to Rs 1970 and some have even reduced it to Rs 1750. However, prospects remain for Kotak Mahindra Bank in the long term.