HDFC Bank Shares Down: Decoding the Dip and Future Outlook

HDFC Bank, India’s largest private sector bank, has seen its share price tumble over 12% this week after reporting underwhelming results for the December 2023 quarter. The stock hit new 52-week lows as investors reacted to stagnant margins and lower-than-expected profitability.

Currently HDFC Shares Down

HDFC Bank shares have declined sharply after the lender reported a 2.65% increase in consolidated net profit to ₹17,258 crore for the December 2023 quarter. The stock closed 12% lower on Wednesday at ₹1476.65 compared to ₹1678.95 last week.

The private sector banking heavyweight has faced heavy selling pressure this week, with foreign portfolio investors offloading shares worth ₹10,578 crore in a single day. This FPI selling weighed on market sentiment.

HDFC Bank’s net interest margin remained unchanged at 4.1% in the latest quarter. Its net interest income grew to ₹28,470 crore. However, other income fell to ₹11,140 crore versus ₹11,305 crore last year.

What Affected HDFC Bank’s Stock Price

Several factors have contributed to the decline in HDFC Bank’s stock price:

  • Disappointing Q3 results with stagnant margins
  • FPIs selling shares worth thousands of crores
  • Concerns over the impact of the merger with HDFC Ltd
  • Underperformance compared to peers like ICICI Bank
  • Lower-than-expected loan growth and deposit mobilization

In addition, technical indicators like the RSI and moving averages point to a bearish sentiment for the stock.

Stock Market Tumbles After Nifty Bank Downfall

HDFC Bank’s stock crash led to a bloodbath in banking shares, with the Nifty Bank index plunging over 2000 points on Wednesday. The index declined further on Thursday, down 320 points from the previous close.

This banking rout also pulled down the broader markets, with the Sensex falling 757 points while the Nifty lost 279 points. The ripple effect from HDFC Bank’s results demonstrates its influence on banking stocks.

Analysts Remain Cautiously Optimistic

Brokerages have mixed views on HDFC Bank after its lacklustre Q3 performance. While analysts point to its healthy asset quality and low NPAs, some have downgraded it to ‘hold’ citing margin pressures.

CLSA believes investors are nearing the end of earnings downgrades for HDFC Bank. It expects earnings per share growth to revive from Q1 FY25.

However, HDFC Bank is currently trading below its 5-day, 20-day, 50-day, 100-day and 200-day moving averages, indicating bearish sentiment.

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HDFC Bank’s Share Price Target for 2024

HDFC Bank is currently trading around ₹1470, significantly lower than 2022 highs above ₹1700. While technical indicators point to near-term weakness, analysts remain cautiously optimistic about its long-term growth prospects.

Brokerage firm Edelweiss sees HDFC Bank’s current valuations as attractive and has a price target of ₹2000 for 2024. It expects the bank’s EPS to improve steadily over the next 12 months.

Jefferies also has a 12-month target price of ₹2000 per share. It believes the impact of the HDFC Ltd merger will become visible over the coming quarters.

HDFC Bank’s Current Market Value

HDFC Bank has a market capitalization of around ₹11.7 lakh crore, making it one of India’s most valuable companies.

The stock is trading at nearly 21 times trailing 12-month earnings and 2.8 times book value. Valuations look attractive considering its long-term growth runway.

Despite near-term headwinds, HDFC Bank remains well-positioned to benefit from India’s under-penetrated banking sector. While the stock may remain volatile in the near term, it continues to be a core portfolio holding for long-term investors.

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