Indian Banks: Were Investors blinded?

Indian Banks: Were Investors blinded?

Volatility erupted in India's stock market as Yes Bank Ltd. and Dewan Housing Finance Corp. fell heavily, triggering an exit from financial shares.

Yes Bank sank after India's banking regulator refused to extend the tenure of the lender's chief executive officer, while Dewan suddenly tumbled as much as 60 percent in early afternoon trading, its steepest loss on record.

Sharp equity losses risk raising concern among investors already nervous about financial shares after a recent debt default by Indian shadow bank Infrastructure Leasing & Financial Services Ltd. 

Investors fret that more bad loans may come to the light as RBI may take stricter action following under reporting of bad loans by some of larger lenders including Yes Bank.

The RBI has also taken a tough line with other private-sector bank CEOs in recent months. The central bank refused to extend Axis Bank's CEO tenure.