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HDFC Bank: FPIs Trim Stake by 446 bps in Q4; What Lies Ahead for the Indian Lender?

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By SK_INSIGHTMEDIA

HDFC
UKRAINE – 2021/08/23: In this photo illustration, HDFC Bank Limited logo is seen displayed on a smartphone and a pc screen. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
HDFC Bank’s performance as FPIs reduce stake by 446 basis points in Q4. Explore expert opinions, key metrics, and strategic initiatives shaping the bank’s future amidst market uncertainties.

Introduction

In the dynamic landscape of the Indian stock market, , the third most-valued company on Dalal Street, witnessed a significant shift in its shareholding pattern in the last quarter. Foreign Portfolio Investors (FPIs) made notable adjustments to their holdings, sparking discussions about the future trajectory of this banking giant. Let’s delve deeper into the recent developments and explore what lies ahead for HDFC Bank.

FPIs Cut Stake: Understanding the Numbers

The latest shareholding data on stock exchanges revealed that FPIs offloaded HDFC Bank Ltd shares during the last quarter. At the end of March, 2,663 FPIs collectively held a 47.83% stake in the bank. This marked a substantial decrease of 446 basis points from their 52.29% stake at the end of the previous quarter.

Factors Driving the FPI Selloff

The sell-off by FPIs can be attributed to concerns triggered by HDFC Bank’s March quarter results. Analysts noted several factors contributing to these concerns, including higher operating expenses, reduced yields, and marginally decreasing Return on Assets (ROA). These factors collectively led to the underperformance of Bank , which witnessed an 11% decline in 2024, contrasting with a relatively stable performance of the BSE Bankex during the same period.

Analyst Insights: Is the Worst Over?

Despite the challenges faced several brokerage firms maintain an optimistic outlook. Arihant Capital Markets reiterated a BUY rating on the stock with a target price of Rs 2,072, valuing the standalone bank at 2.8 times FY26E Price to Adjusted Book Value (P/ABV). Nomura India echoed a similar sentiment, suggesting that the worst might be behind for HDFC Bank’s share price. Institutional investors are increasingly comfortable with a potential low-teens loan growth outlook over the near-to-medium term as the bank focuses on improving its funding mix.

Fundamental Strengths: Deposits Growth and Retail Focus

Amidst the market fluctuations, HDFC Bank continues to showcase fundamental strengths. The bank reported a deposit growth of 7.5% sequentially and 26.4% year-over-year for the March quarter of 2024. Notably, the bank’s focus on growing retail deposits is evident, with retail deposits growing by 6.9% quarter-over-quarter and 27.8% year-over-year. Furthermore, HDFC Bank’s Current Account Savings Account (CASA) share improved sequentially, reflecting its commitment to enhancing its funding mix.

Analyst Recommendations: Evaluating Potential Upside

InCred Equities reaffirmed HDFC Bank as a High Conviction ADD with a target price of Rs 2,000. The firm believes that HDFC Bank is better positioned due to its improved penetration, which provides portfolio granularity and command over loan pricing. InCred Equities expects HDFC Bank to deliver a 2% Return on Assets (RoA) and a 16% return on equity (RoE). They have valued the standalone bank at 2.7 times FY25F Book Value (BV) and its subsidiaries at Rs 200 per share.

Expert Opinions: Diverse Perspectives on HDFC Bank’s Future

Analyst opinions on HDFC Bank’s future trajectory diverge, reflecting the complexity of the current market environment. While some analysts maintain a bullish outlook, citing potential upside and favourable valuation metrics, others adopt a more cautious stance. Factors such as loan growth moderation, funding mix improvement, and evolving market conditions contribute to the diversity of perspectives among market experts.

Strategic Initiatives: HDFC Bank’s Response to Market Challenges

In response to market challenges and changing investor sentiments, has proactively implemented strategic initiatives. The focus on growing retail deposits and improving the CASA ratio underscores the bank’s commitment to strengthening its funding base and enhancing operational efficiency. Moreover, ongoing efforts to optimize loan pricing and portfolio granularity reflect HDFC Bank’s adaptability in navigating dynamic market conditions.

Long-Term Outlook: Positioning HDFC Bank for Sustainable Growth

Looking beyond short-term fluctuations, HDFC Bank remains well-positioned for sustainable growth in the long run. The bank’s strong fundamentals and its market-leading position and strategic initiatives form a solid foundation for future success. While near-term uncertainties may persist, resilience and ability to capitalize on emerging opportunities bode well for its prospects in the years to come.

Also read: UK SKILLED WORKER SALARY THRESHOLD SOARS TO RS 40.8 LAKH: NOW WHAT WILL INDIAN DO?

Conclusion:

As HDFC Bank navigates through the current market uncertainties, it stands firm on its commitment to delivering value to its shareholders. Despite short-term challenges, the bank’s strategic focus on improving its funding mix, enhancing retail deposits, and maintaining a robust portfolio granularity instills confidence among investors. With favourable analyst recommendations and a solid fundamental base

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