introduction
HDFC Bank, India’s largest private lender, witnessed a notable decline of 4% in its shares during the recent trading session. The bank’s shares closed 3.85% lower on the National Stock Exchange (NSE) at Rs 1,566 apiece and dropped by 4% on the Bombay Stock Exchange (BSE) at Rs 1,563.90. This decline marked HDFC Bank as the top loser on both the Nifty 50 and Sensex indices.
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One of the significant concerns that triggered this decline is the potential 25 basis points (bps) reduction in the net interest margin (NIM). Factors contributing to this expected reduction include the incremental cash reserve ratio (CRR) and excess liquidity. HDFC Bank had accumulated a substantial liquidity buffer before a merger, contributing to this anticipation.
HDFC Bank’s stock rating fall
Responding to these concerns and the outcomes of a recent meeting, global brokerage firm Nomura downgraded HDFC Bank’s stock rating from ‘buy’ to ‘neutral’ and adjusted the target price from Rs 1,970 to Rs 1,800. The downgrade was influenced by multiple negative surprises from the analyst meeting, including net worth adjustments affecting the book value per share (BVPS), projected NIM reductions, higher cost-to-income ratios due to accounting changes, and a potential rise in non-performing assets (NPAs) in HDFC’s corporate loan book. Additionally, Antique Stock Broking lowered its price target for HDFC to Rs 1,925 from Rs 2,025, further contributing to the decline in HDFC Bank’s stock.
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The recent decline in shares adds to HDFC Bank’s underperformance following the merger with HDFC. The year-to-date loss for the bank now stands at 3.85%, with shares down over 4% in the past five sessions.
market analysis
Market analysts anticipate a phase of consolidation for HDFC Bank’s shares in response to the concerns raised by various brokerages. Analysts, as quoted in a CNBC-TV18 report, suggest that immediate support for the stock is expected in the range of Rs 1,530-Rs 1,500. While a near-term correction may be possible, analysts predict the stock to remain within the range of Rs 1,500-Rs 1,700. However, a fall below Rs 1,500 could potentially lead to further correction.
In conclusion,
HDFC Bank’s recent share decline is attributed to concerns regarding a potential reduction in net interest margin and other factors highlighted during an analyst meeting. Analysts foresee a period of consolidation for HDFC Bank’s shares and closely monitor the stock’s performance within a specific price range. The bank’s future performance will be influenced by how it navigates through the mentioned concerns and maintains investor confidence. Stay tuned for further updates on HDFC Bank’s market performance