When any bank scam or fraud came in to picture, why the stock value is keeps falls down? since there is no change in customer count,operational income,interest rates,job cuts ,branch&ATM maintenance.Also how the bank will bare the losses money in the case of frauds?
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change in profitability and mismanagement, which was being hidden.
Excellent question bro.
The answer is straight forward … its a conspiracy… actually mind control conspiracy. And this is how it happens. u know… its really bad…
Demons out there (aka big players, FIIs or some imaginary villains) feed the news that India was fraud free, utopian and a heaven on earth long long…long time ago and this fraud is a disaster and gonna dome the bank… they pay (yeah… in actual cash… or may be in gold) the media, social media , trolls to talk about it…
We retail traders being noble, non-greedy, innocent, pure souls believe what is on the news and sell or short the said bank. Prices dive and those demons then start accumulating the stocks and after couple of months they start having fun by selling the stocks. Again we being noble, non-greedy, innocent, pure souls we believe the price raise and we buy it.
U see its a circular mind control conspiracy.
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Any part of this answer seriously relates to the question asked by the OP?
You gave your money to some business to grow but after sometime if you find that there are numerous frauds happening in that business, will you still put in your money?
Problem is the " System" in which PSU banks are subject to work under’ all the NPA 's are nothing but frauds and from several years keeping aside portion of the profit as provision to cover NPA’S as and when NPA’s recovered provisions are reduced, in that way PSU banks worked , but because of Governments social obligations and for economical growth PSU banks being made /forced , mandated to lend more , but some greedy banks employees even after getting good salary & job security are mainly responsible for the frauds.
Its the sentiment made PSU bank stock to fall, Now Fund managers are talking & advising to invest in PVT Bank’s , Pvt Banks are totally insecure , they can collapse overnight , many of them are forgotten , during 2008-2009 period Infosys withdrawn 1000cr from ICICI Bank and deposited in SBIN
and the latest being again ICICI Bank (https://timesofindia.indiatimes.com/business/india-business/cbi-begins-initial-check-into-charges-against-icici-ceo-chanda-kochhars-husband/articleshow/63551490.cms )
and also " Global Trust Bank " fraud totally forgotten. RBI and Oriental Bank of commerce saved the GTB account holders.
Once system is set right , PSU Banks do well , Government being the biggest holder & Promoter its possible , I do hold 1500 shares of a particular PSU Bank , not worrying the present de valuation ( once very long back many of the PSU Bank shares are traded below their face value ( Rs 10 )
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if u have better answer. please share
What do you expect in this scenario?
Do you expect the price to go up , seriously?
This applies not just to bank, but many other companies.
Even rumous of fraud will tank the prices of stocks.
If its PSU bank, tax payers money will be used. But this is about to change , but can’t say when.
if private , they might increase rates or cover up the earning by increasing charges.
Investors don’t like Fraud. They arrive at a fair value price for the stock through complex valuation methods before buying or selling the stock. This valuation doe’nt account for Fraud which seriously undermines their Fair value price. So they sell out of the stock that gets Fraud taint. This causes stock price to crash or fall severely.
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Erosion of capital