Every Mutual Fund that I hold has a significant holding in HDFC Bank. It is a large component of both Nifty50 and Sensex. Most investors I talk to say that it’s a safe bet and will go up eventually. However, for the past 3 years, the stock has been flat. A FD in HDFC Bank would have given better returns than the stock.
Why is everyone married to this? Other than being big, I don’t see them with a competitive advantage. The technology innovation that made them this big 2 decades ago seems to have been put on the back burner. Their tech (like every other major bank in India) SUCKS!
Furthermore, Banks are in for a tough time. Liquidity is falling. People are opting less for an FD and more for markets. Interest rates from Banks have climbed to 8%. If a Debt Mutual fund and FD is taxed the same, a Debt fund is better given the instant liquidity. Furthermore, Equity Arbitrage funds give much better taxation treatment compared to bank FDs (for larger amounts).
HDFCBANK’s valuation rivals that of Goldman Sachs while having about 4 times less Assets Under Management. HDFCBANK by market cap is the 10th largest bank in the entire world! Amazing, right? But by assets under management it is 74th! Even with a growth market premium, this valuation seems questionable.
For trading Bank stocks, the general rule is PB over 2 is a sell and PB under 1 is a buy. HDFCBANK’s PB at times traded at 6. After the past few years of no growth in share price, it has come down to 2.7. There has been a lot of FII Selling pressure, despite HDFC being known as the FII’s darling stock once. Perhaps they have realised just how overvalued this stock had been historically and now are trying ti bring it inline with what a Traditional Bank trades at Globally.
So far, HDFCBANK (and all other private banks) were steeling marketshare from government banks. One of the easiest tasks there is. The last 5 years also saw UPI payments go mainstream and more and more people get bank accounts- yet HDFC slogged.
Brother, I worked at HDFC for 2 years and left in 2018. Yes, times have changed but I think HDFC is still probably the best and please don’t overanalyse HDFC based on PB, PE and all technicals. Just look at Nifty, it hits a new high almost daily even though nothing significant happens. Isn’t that right?
Mr. Aditya Puri, this man has given a lot to the bank. From 10-second personal loans, easy auto loans for low-salaried individuals and selling 50+ products that other banks don’t have. No other bank even comes close to HDFC in terms of customer base, branches, and ATMs. Loan to deposit ratio and NPA are also looks good right now compared to other private banks.
A video leaked some time ago, pls see employees dedication & stress.
It’s because technical analysis suggests 1720+ in the near future. We also have to understand that fund managers and their AMC teams have access to insider information that retailers like us, with our limited resources, do not have. Once their target is achieved, you won’t see a single fund holding HDFC Bank unless they get information indicating it’s going to rise. They are simply trying to capture the trend. No mutual fund holds stocks as long-term investments; only individual investors do so.
Nifty is rallying but the growth is coming from companies other than HDFCBANK. 3 years of 0 growth in share price is a rather sad thing for India’s biggest Bank. One of the reasons (among many others) is the depreciation of INR. Whenever a currency falls, the stock market goes up as foreign capital rushes in to buy stocks at a discount.
Looking at the NYSE ADR, HDFCBANK in terms of USD has actually fallen 25% from the 2021 all time high. This is mostly due to Rupee depreciation- but this shows that there has been negative growth in the share price.
I have no doubts about Aditya Puri’s contributions but since he stepped down, he Bank’s future outlook has come into question. Similar to Kotak. It’s not like HDFC is going anywhere and will most likely still be India’s biggest bank for years to come.
The question is will it grow and will it outperform the market? If it’s not growing then there is no point investing in the share and you are better off just making an FD with that money to atleast keep up with inflation.
I do see a lot of brokerages with price target for HDFC from 1800-2000.
The problem is- these price targets were given starting October 2021 and have been the same since then. Hypothetically, if you were to have invested then at the price of 1650 looking at the same technicals, your CAGR would’ve been a solid 0%. Even if this price target of 1800 is met now, your CAGR would less than 5%. In 3 more years, yea sure it’ll definitely cross 2000 but the speed also matters.
While DIIs keep pouring money into HDFCBANK, FIIs keep selling. Many international brokerages have even lowered HDFCBANK from a Buy to a Neutral or even a Sell.
People say HDFCBANK is a safe share, your money won’t go down. But it won’t go up either. And if it isn’t going up, then might as well invest in FD rather than the Bank’s shares.
Well, you are right about the price targets given by these research analysts and companies. Actually, I should have made it clear that the target price I mentioned is not from these reports or firms. I meant that if you do technical analysis yourself, you’ll come to the conclusion of 1720+ as of now. Otherwise, never rely on these buy/sell/hold reports on so-called websites. They purposely get 5 or 10 trades wrong so that your stop-loss is hit and they or the company make money. This is the reality. Anyway, this is a public forum, so let’s not delve into that.
Regarding HDFC Bank holdings by mutual funds, it might be completely different from what these buy/sell/hold reports suggest. It doesn’t necessarily mean that what mutual funds hold in their portfolios aligns with these reports. To cross-verify, just check the factsheets post the dates of Oct 2021 that you mentioned. In a few sheets, I did not see HDFC Bank holding more than 4% even in large-cap funds (who have > 15% in hdfc now). Additionally, even if the stock is still back at the same levels, the funds might try to capture swings, like upswings. They can churn in and out in between; that is also possible. It need not be that HDFC Bank has been held consistently since 2021 until now. Minor trends can also be captured.
Because of all the high inflows in mutual funds, the money has to go somewhere. Only HDFC (and Reliance to an extent) even offer a chance at that much capital absorption. They have the highest free float market cap in India.
It is one of the few companies left that are not trading at absurd PEs. Some other fundamentals are good too. Easiest pick for MFs. Do not have to worry about liquidity also and they can justify their investments due to the fundamentals.
Source?? their ownership was 33% this time last year. Now it is at 47%. So they are increasing their stake.
The ownership data shows 52% in between but I think it was due to merger and the ownership stats were messed up for a few months then since HDFC (the parent group) was mainly owned by FIIs.
Your point about Liquidity is valid! I was surprised to see some large SMALL CAP funds having 10% Reliance and 10% HDFC BANK holdings but this makes a lot of sense. The Indian Markets have grown in Depth with capital but not border with more investment opportunities (not at the same rate at least). There truly is a lack of Stocks which can absorb such liquidity without hitting circuits.
But at this point I wonder if GSECs are a better place to park capital rather than these shares?
Meanwhile, RBI doesn’t let funds invest outside of India to let this excessive capital flow out and not over pump the domestic markets.
Yes it was 33% this time last year but it had also jumped to 54% the very next quarter. QoQ, the last 3 Qs have seen a decline with it sitting at 40.79% now.
Several brokerages have commented on HDB. StockNews.com cut shares of HDFC Bank from a “hold” rating to a “sell” rating in a research note on Thursday, June 13th. JPMorgan Chase & Co. downgraded shares of HDFC Bank from an “overweight” rating to a “neutral” rating in a report on Monday, July 22nd.
Short interest on the HDB ADR is also build up - tho it isn’t anything crazy.
