HDFC Bank recovers after 11% fall in last 2 sessions; what should investors do now?
around 11 percent over the past two days on the back of disappointing December quarter (Q3FY24) results. Broader market optimism as well as global brokerage house CLSA's positive outlook led to the recovery. The stock rose around 2 percent to its intra-day high of ₹1,486.80.
It later turned red and fell around half a percent. While earnings by the country's biggest private sector lender remained a concern, global brokerage CLSA has reiterated its ‘buy’ rating on the stock with a target of ₹2,025 per share, implying an upside of almost 38 percent. "While most domestic clients were unhappy, we felt that it was slightly different for foreign investors, many of whom believe that we are near the end of the EPS cuts cycle.
Some of the key concerns for HDFC Bank lay on slower-than-anticipated deposit growth and margin compression. But some clients believed that it was lower deposit growth was more of a macro problem and not intrinsic alone to HDFC Bank," it said. On deposits, some clients believed that it was a macro problem and not intrinsic to HDFC Bank.
The brokerage expects the RBI to reduce the $2,000 crore liquidity deficit through a mix of FX purchases, a possible 50-bp CRR cut, and OMOs. Meanwhile, domestic brokerage LKP Securities has also maintained its ‘buy’ call on the stock with a 1-year target of ₹1,762, indicating an 18.5 percent upside. The brokerage is of the view that the lender may see a marginal reduction in ROA/ROE for FY24E owing to a higher C/I ratio and margin pressure.
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