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HDFC Bank share price tanks nearly 10% in 5 days; should you buy, sell or hold the stock?

HDFC Bank share price fell more than 3 per cent to Rs 1,348.05 apiece on BSE in Tuesday’s trade.

HDFC Bank, HDFC share price
Analysts say that even though the HDFC Bank merger news was great and Q4FY22 results were decent, a sharp fall in the HDFC Bank stock price has been seen due to very high expectations and a weak market sentiment.

HDFC Bank share price fell more than 3 per cent to Rs 1,348.05 apiece on BSE in Tuesday’s trade. The stock has declined over 15 per cent in the last 9 days, and nearly 10 per cent in 5 days. In comparison, S&P BSE Sensex lost 3 per cent in the last five days. Analysts say that even though the HDFC Bank merger news was great and Q4FY22 results were decent, a sharp fall in the HDFC Bank stock price has been seen due to very high expectations and a weak market sentiment. Earlier this month, Housing Development Finance Corporation announced that it will merge with its subsidiary HDFC Bank. The merger is subject to regulatory approvals.

“Technically, the stock looks attractive and current range of Rs 1340-1360 can be used to accumulate for higher targets of Rs 1600-1845 in the coming months,” Pavitraa Shetty, Co-founder & Trainer, Tips2Trades, told FinancialExpress.com. HDFC Bank reported a 24 per cent growth in consolidated net profit to Rs 10,474 crore, in line with expectations pinned by most analysts. The bank’s profit soared when compared to the previous year but was marginally lower sequentially. 

The lifting of the RBI’s restrictions on card or digital initiatives, management’s guidance to re-accelerate retail credit growth and focus on risk-adjusted margins should be long-term positives, analysts at Emkay Global Financial Services, said in a note. It added that as far as the merger is concerned, the HDFC and HDFC Bank will have time (2-3 yrs) to moderate regulatory drag by building buffers in both entities. “We expect proforma average RoE for HDFC Bank (merged) at 16.6% over FY24-25E, which will still be reasonable vs. large peers. We retain long-term buy on the stock given recent correction,” the research firm said.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said that there are some concerns regarding the marginal hit to profitability of the merged entity due to higher SLR and CRR requirements. (HDFC Ltd doesn’t have statutory requirements like SLR and CRR). He added that the weakness in HDFC twins after the merger announcements is due to sustained selling by FPIs and shorting by speculators exploiting the FPI positioning in the stocks. “From the valuation perspective HDFC twins are attractively valued, the short-term technical weakness notwithstanding,” Vijayakumar said.

HDFC Bank is a good investment because of its excellent balance sheet growth, substantially higher provisioning than the statutory need, and strong capital cushion of 17.9% at Tier 1 level, Animesh Malviya, analyst at CapitalVia Global Research, told FinancialExpress.com. Malviya said that HDFC Bank has the lowest GNPA (percentage) in the sector, and the Bank’s capital adequacy, which stands at 18.9%, is sufficient to support 15-20% advance growth. “HDFC Bank is going to be a ‘buy’ for the coming months,” Animesh Malviya said.

The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.

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