HDFC Bank Mcap declines of ₹1 lakh crore in last 4 sessions; what lies ahead?
HDFC Bank share price has declined over 6 per cent on the BSE and its market capitalisation (Mcap) had declined around ₹1 lakh crore in the last four trading sessions. Brokerage firms have expressed mixed views on the stock after the bank’s analyst and institutional investor meeting was held earlier this week. Currently, HDFC Bank’s Mcap stands at ₹11.59 lakh crore, according to BSE data.
The stock opened at ₹1,557 against the previous close of ₹1,553.60 and fell 2.11 per cent to the level of ₹1,524 in Friday’s trade. Shares od HDFC Bank finally closed 1.57 per cent lower at ₹1,5629.29.
On Friday, domestic equity benchmarks extended losses for the fourth consecutive session with Nifty50 closing with a loss of 68 points, or 0.34 per cent, at 19,674.25 while the Sensex ended at 66,009.15, down 221 points, or 0.33 per cent. Foreign fund outflows and heavy selling in HDFC Bank shares also hit investor sentiments, according to traders.
Nifty 50 fell 2.6 per cent for the week while the Sensex declined by 2.7 per cent. The BSE Midcap index lost 1.7 per cent and the Smallcap index fell 2 per cent for the week ended September 22.
Most sectoral indices ended with losses today. Nifty Bank index ended 0.03 per cent lower. “The BankNifty index witnessed a significant double top breakdown pattern, which often signals a reversal in trend. This bearish pattern was largely influenced by selling pressure in HDFC Bank. The index breached its 20-day moving average (20DMA) located at 45,000,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.
‘’A break above this level could trigger some short-covering, but the overall sentiment remains bearish. The prevailing sentiment in the Bank Nifty index remains bearish. As a result, it’s advisable to maintain a “sell on rise” approach. The next immediate support is seen in the 44,500-44,400 range,” added Shah.
In its analysts’ meeting, HDFC Bank pointed out the possibility of a worsening of net interest margin (NIM), net worth and asset quality in the short term following its merger with parent Housing Development Finance Corp. (HDFC).
NIM may narrow 25 basis points (bps) due to the combined effect of incremental cash reserve ratio (CRR) and excess liquidity, analysts cited chief financial officer Srinivasan Vaidyanathan as saying at the meeting. Before the merger, HDFC had built an excess liquidity buffer of close to ₹1 trillion.
Brokerages revises TP, say merger pangs to drag near-term outlook
Domestic brokerage JM Financials said that given the large excess liquidity build-up in the run up to the merger, the incoming NIM of HDFC Ltd stood at 2 per cent, compared to 2.7 per cent for 1QFY24 and this could drag down the merged entity’s margins by 25-30bps in the near-term and will recover gradually over the next 2-3 quarters.
As per the management, HDFC’s opening networth will see impact of multiple factors which include a) harmonization of provisioning policy b) tax-related adjustments c) accounting alignment and d) dividend payout. As a result, HDFC Ltd’s opening net worth will be lower by around 16 per cent over March 2023 levels. Based on the assessment after the bank’s analysts’ meeting this week, JM Financials has revised HDFC Bank’s share target price to ₹1,850 from ₹1,900 and maintains a ‘buy’ rating on the stock.
‘’Given the adjustments to cost ratios and lower NIMs, we tweak our below consensus EPS estimates slightly (we had already built in higher opex). However given changes to the incoming net worth, our BVPS estimates are reduced by ~3-4 per cent. Maintain BUY with revised TP of ₹1,850,” said JM Financials.
Download The Mint News App to get Daily Market Updates.
Updated: 22 Sep 2023, 06:12 PM IST
