HDFC Bank dips 5%, nears 52-week low; stock down 10% in one week

The stock has underperformed post management change, more so due to the RBI's embargo on its card/ digital initiatives and Covid-induced disruption.

Shares of HDFC Bank dipped 5 per cent to Rs 1,358 on the BSE in Wednesday’s intra-day trade on the back of persistent selling pressure in financial shares, mainly private institutions.

The stock of private sector lender traded at its lowest level since April 2021. The stock quoted close to its 52-week low of Rs 1,353.10 touched on April 12, 2021. In comparison, the S&P BSE Sensex was down 1.9 per cent at 55,173.

HDFC Bank has underperformed the market by falling 10 per cent in past one week, as compared to 3.5 per cent decline in Sensex. In the last one year, the stock has slipped 13 per cent, as against a 10 per cent rally on the BSE benchmark index.

The underperformance can be attributed owing to the following reasons - change in management change, RBI's embargo on its card/ digital initiatives and Covid-induced disruption.

The card embargo is now lifted; while hopes remain abound on lifting of the restrictions on digital initiatives 2.0 in the near future. With growth trends improving and asset-quality well under control with strong buffers in place, analysts at Emkay Global Financial Services expects HDFC Bank to report healthy return ratios (RoE @ 17-18 per cent).

Analysts at JP Morgan believe HDFC Bank’s valuations at below long cycle mean P/B and P/E levels are attractive and the bank should continue to deliver low-risk sustained compounding (the brokerage firm forecast 20% F22-24E EPS CAGR).

“We see HDFC Bank as a steady, low-risk and stable compounding story. The bank should, in our view, deliver stable earnings and book value growth metrics with healthy asset quality performance. The bank’s initiatives on increasing digitization in the bank, push in rural business via CSCs, increased customer mining through VRMs and high growth in payments business, we believe, position it for structurally higher growth in the market over an extended period of time,” the foreign brokerage firm said in January 2022 report, with ‘overweight’ rating on the stock.