WATCH | Why is the market dumping India's biggest bank stocks

The 7% fall in HDFC Bank shares contributed more than half of what has turned out to be the worst day for India's stock market in over a year.

Worse-than-expected earnings from India's largest private bank (by market capitalisation) and, separately, the downgrade of State Bank of India (the country's largest bank by the sheer size of its loan book) have dampened the mood in the stock market.

Two of the country's biggest lenders are now making less money on every rupee lent because the deposit rates are rising faster than the interest rate on new loans.

Nifty Bank has slipped over 1900 points, with HDFC Bank contributing nearly 1,500 points towards its downfall.

Santanu Chakrabarti from BNP Paribas believes the current margin squeeze in banking may worsen until September 2024 before it starts to ease. He also believes IndusInd Bank and AU Small Finance Bank are better bets for those looking to swoop up stocks during this correction.

On the other hand, Deven Choksey, MD of DRChoksey Finserv, believes those buying shares of HDFC Bank at today's (January 17) price (after the sharp fall) can potentially make returns of 25% to 30% in the long run.

Ashutosh Mishra, Head of Research, Institutional Equities at Ashika Stock Broking, concurs with Choksey in seeing HDFC Bank as a compelling opportunity for the next 2-3 years.