Upside capped for Kotak Bank stock in near term, but downside's limited, too

"The digital acquisition of customers will be adversely impacted but the reputational impact is surprising since Kotak is considered to be a conservative bank with good processes and systems in place," said Kaitav Shah, , Anand Rathi Brokerage.

Shah said that it typically takes 6-12 months to emerge from a regulatory action depending on the severity and also took more than 6 months to get permission from the central bank to restart the credit cards piece.

"The perception of Kotak Bank has taken a hit post the RBI order which has led to the knee jerk reaction today," said Hemang Jani, director, Finazenn, an investment advisory. "The decline was higher than anticipated."

"The upside potential is capped for the stock in the near term but given the current information the downside should be limited," said Shah. "While the long-term perspective holds, it is difficult to predict when the stock will bottom out."

Shah said that Kotak Bank has been considered a premium bank and the is likely to knock off some of the premium valuation but added that this situation is not in any way like Paytm Bank's scenario.

Jani said that Kotak Bank was trading at 2.4 times Price to Book and 17.4 times Price to Earnings valuations, which could take a beating post the RBI action.

Analysts said that the duration till which the Central Bank maintains the bank will also play a crucial role, going forward but stability and recovery are likely to take longer.

"No significant correction is expected from the current levels since most of the negativity is already discounted," said Jani. "A further decline is not anticipated to be more than 5% from current levels but until the ban remains, the growth numbers are expected to take a beating in the near term."