HDFC Bank Share Price Today: HDFC Bank Bounces Back with 2% Gain After 11% Slump in Last 2 Sessions; Analysts Weigh In on Investment Strategy

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HDFC Bank rebounds with a 2% gain after an 11% slump, driven by disappointing Q3FY24 results. Analysts’ varied perspectives prompt investors to reassess strategies amid market uncertainties.

New Delhi, January 20, 2024 – In a swift recovery on Friday’s trading session (January 19), HDFC Bank’s shares rebounded by around 2%, reaching an intra-day high of ₹1,486.80. This upturn followed a notable 11% decline over the previous two days, triggered by disappointing Q3FY24 results. Investors, initially concerned about the country’s largest private sector lender’s earnings, found relief in the broader market optimism and the positive outlook from global brokerage CLSA.

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Despite apprehensions over slower-than-anticipated deposit growth and margin compression, CLSA reiterated its ‘buy’ rating on HDFC Bank, setting a target of ₹2,025 per share, implying an enticing upside of nearly 38%. Some foreign investors seem optimistic, believing that the bank may be near the end of the earnings-per-share (EPS) cuts cycle.

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Addressing concerns, CLSA noted that slower deposit growth might be more of a macroeconomic challenge than a problem intrinsic to HDFC Bank. The brokerage anticipates the Reserve Bank of India (RBI) to address the $2,000 crore liquidity deficit through various measures, including foreign exchange (FX) purchases, a potential 50-basis points Cash Reserve Ratio (CRR) cut, and Open Market Operations (OMOs).

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In addition to CLSA, domestic brokerage LKP Securities has maintained a ‘buy’ call on HDFC Bank, setting a 1-year target of ₹1,762, indicating an 18.5% upside. While foreseeing a marginal reduction in Return on Assets (ROA) and Return on Equity (ROE) for FY24E due to a higher Cost-to-Income (C/I) ratio and margin pressure, LKP Securities remains optimistic about the bank’s overall position.

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HDFC Bank reported a robust net profit of ₹16,372 crore in Q3FY24, reflecting a substantial 33% growth from the year-ago period. Despite a 24% YoY increase in net interest income to ₹28,470 crore, the net interest margin (NIM) of 3.6% fell short of expectations. Concerns arise from a higher credit-to-deposit ratio and a lower liquidity coverage ratio in Q3, potentially limiting NIM expansion in the future.

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Ajit Kabi, Research Analyst at LKP Securities, pointed out, “The third quarter performance seems at par; however, the higher credit-to-deposit ratio and lower liquidity coverage ratio may limit NIM’s expansion going forward.”

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After the recent correction, HDFC Bank’s stock is now over 15% below its record high of ₹1,757.80 on July 3, 2023. Currently trading near its year-low, it sits just around 2% above its 52-week low of ₹1,460.55, recorded on October 26, 2023. Investors are closely monitoring developments, weighing the insights from global and domestic brokerages in determining their next moves in this dynamic market scenario.

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