Regardless of jumpy market reactions, HDFC Bank remains compelling for investors
When HDFC Bank announced a merger with housing mortgage leader HDFC Ltd last year, signalling the biggest merger in the Indian financial sector, the near- and medium-term challenges of pulling it off was clear to everyone. Or it should have been to analysts and investors. On Wednesday, the HDFC Bank stock fell by over 8%, the highest single-day slide in the past three years, dragging down the benchmark Nifty index by over 4 %.
That may not be surprising considering the outsize weight of 14 % that the stock has in the Nifty 50 index. It may be foolish to search for logic in an exuberant Indian stock market with a run-up in stocks, especially after the results of state polls in November. But the ostensible reasons for the sell-off in the stock and the resultant plunge in the Nifty or the Sensex sound illogical.
One of the main reasons cited for the “disappointment" in the latest quarterly numbers of HDFC Bank is that its net interest margin, or NIM, was lower, and that pressure would continue on the bank to improve this metric. For the third quarter of FY24, HDFC Bank reported NIM of 3.6 %, while net profit rose 33.5% over the year, and net interest income by 24%. Growth in gross non-performing loans ratio, or NPAs, was 1.23%, with deposits growing by over 27 % in the December quarter.
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