Kotak Mahindra Bank Q4 FY26: Profit up 13%, shares fall

Market reaction: why Kotak Bank led Nifty losers

Kotak Mahindra Bank shares fell on Monday even after the lender reported a profit beat for the March quarter of FY26. The stock slipped as much as 5% to an intraday low of ₹364 on the BSE. It was also flagged as the top Nifty loser, with the stock down about 2.6% at one point. The decline came despite brokerages calling out stronger-than-expected operating performance and margin gains.

The sell-off underscored the gap between quarterly beats and what investors were focused on: return ratios and the sustainability of margins. Several analysts said the quarter was strong on core metrics like PAT, NII and NIM. But they also pointed to weaker return metrics relative to expectations and peers, which can influence valuation for large private-sector lenders.

Q4 FY26 profit beats estimates

Kotak Mahindra Bank reported a net profit of ₹4,026.55 crore for Q4 FY26. That marked a 13.3% year-on-year increase from ₹3,552 crore in the corresponding quarter a year ago.

The headline profit number was accompanied by a steady improvement in underlying operating indicators, according to multiple brokerage notes cited alongside the results. The quarter was described as ahead of expectations on profitability lines, even as the stock reacted negatively in trade.

Net interest income rises; focus stays on margins

Net interest income (NII) increased 8.1% year-on-year to ₹7,876 crore in Q4 FY26 from ₹7,284 crore a year earlier. Brokerages highlighted that net interest margins (NIMs) were better than expected in the quarter, supporting earnings delivery.

At the same time, the margin outlook became an immediate discussion point. Management guidance indicated that NIMs could remain largely flat or see a slight decline in FY27 compared to FY26. The bank, as per the commentary carried with the results, is focusing on extending deposit tenors, currently around 9 to 12 months, by offering higher rates on longer maturities.

Provisions fall sharply, supporting earnings

One of the key supports to quarterly profitability was the reduction in provisions. Provisions for Q4 FY26 came in at ₹516 crore, down 43% year-on-year from ₹909 crore in Q4 FY25.

Profit before provisions and contingencies rose 7% year-on-year to ₹5,855.17 crore for the quarter ended March 31, 2026. Lower credit costs and softer provisioning helped translate operating momentum into a stronger bottom line, and were specifically referenced by brokerages as part of the beat versus estimates.

Asset quality improves in the March quarter

Kotak also reported better asset-quality indicators. Gross non-performing assets (GNPA) declined to 1.20%, from 1.30% quarter-on-quarter and 1.42% year-on-year, as per the lender’s regulatory filing. Net NPAs (NNPA) eased to 0.25% from 0.31% QoQ.

Brokerages referenced the improvement in slippages and credit costs during the quarter, alongside the better NPA metrics. The tone of analyst commentary suggested that the direction of asset quality was supportive, even if investor focus moved quickly to the return profile and margin trajectory.

Morgan Stanley: Overweight, valuation comfort cited

Morgan Stanley maintained an Overweight rating on Kotak Mahindra Bank with a target price of ₹500, implying about 30% upside from current levels. It said the Q4 performance was ahead of expectations, with PAT, NII, NIM and core PPOP beating estimates, while slippages and credit costs declined sharply.

The brokerage expects core PPOP to deliver a 19% CAGR over FY26 to FY28, supported by improving profitability and balance sheet growth. It also flagged valuation comfort, noting the stock was trading at 1.3x FY28 core P/B and 11.5x FY27 core P/E.

Nomura, Motilal Oswal, Elara: targets stay constructive

Nomura reiterated a Buy rating with a target price of ₹460, implying 20.1% upside. It highlighted strong operational performance, led by better-than-expected NIMs, controlled operating expenses and lower credit costs, alongside disciplined growth and improving asset quality trends.

Motilal Oswal also reiterated Buy, with a target price of ₹470 (about 23% upside). It cited controlled slippages and credit costs, along with an improvement in NIMs, while noting management guidance for largely flat or slightly lower NIMs in FY27.

Elara Capital maintained a Buy rating and revised its target price to ₹473 from ₹511, implying 23.2% upside. Elara cited 4.1% QoQ growth supported by better NIMs and loan growth, with advances expanding at over 16% YoY. However, it cut FY27 to FY28 earnings estimates by 2% to 3% due to concerns around NIM pressure and reduced the target multiple to 2x from 2.3x, using a sum-of-the-parts valuation approach.

Market context: indices moved higher even as Kotak fell

On the day, broader markets were higher even as Kotak declined. The Nifty was quoted around 23,923.45, up about 3.46%, while the Sensex was at 77,391.97, up 3.72%. The Nifty Bank index, which includes Kotak Mahindra Bank, was quoted around 52,716.25, up 4.96%.

This divergence highlighted that the move was stock-specific rather than a sector-wide risk-off move, at least based on the index levels provided alongside the stock performance.

Why the stock slipped despite strong Q4 numbers

The immediate negative reaction suggested investors were pricing in more than a quarterly beat. Brokerages explicitly flagged weaker return ratios, including RoE, even as margins improved. When a stock is valued on a premium for quality and consistency, the market can react sharply if return metrics do not keep pace with expectations.

Also, margin guidance mattered. While Q4 NIMs were seen as better than expected, management’s view that NIMs could be flat to slightly lower in FY27 may have tempered the near-term optimism, especially in a competitive deposit environment where longer-tenor deposits may come at higher costs.

Key numbers at a glance

What to watch next

The next key monitorable will be how Kotak manages deposit costs while trying to extend deposit tenors beyond the current 9 to 12 months range. Investors are also likely to track whether the improved asset-quality trend sustains, given that lower slippages and credit costs were central to the Q4 beat.

For now, the results and brokerage targets indicate confidence in the bank’s operational delivery and valuation support. But the stock’s reaction shows the market is still calibrating Kotak Mahindra Bank on return ratios and the durability of margins into FY27.