HDFC Bank shares: At record high, should investors pick the stock with single-digit returns in 2024?

Shares of HDFC Bank hit their record high for the second straight session on Tuesday amid high volatility in the broader market. The rally was powered by an expected increase in the heavyweight lender’s MSCI index weightage, which is projected to draw $1.9 billion in inflows. The MSCI November 2024 index review came into effect from Monday. 

HDFC Bank shares gained 1.09% to a high of Rs 1804.10 on BSE.  In the previous session too, the stock hit a record high of Rs 1801.90. 

The banking stock is trading neither in the oversold territory nor in the overbought zone as the relative strength index (RSI) of HDFC Bank stands at 61.8.

However, the large cap stock is trading higher than the 5 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages.

Market cap of HDFC Bank rose to Rs 13.59 lakh crore on BSE. Total 1.62 lakh shares of the firm changed hands amounting to a turnover of Rs 28.89 crore on BSE. HDFC Bank stock has a one-year beta of 1. This signals the stock has average volatility.

While HDFC Bank stock hit record high in the current session, it has gained just 4.52% in 2024. The private sector lender could deliver 16% returns in a year. Considering the sluggish pace of stock this year, investors would be wondering if the rally is for real or is it a momentum trap. 

KKunal V Parar, VP of Technical Research and Algo, Choice Broking said, "The stock faces strong resistance at Rs 1,800 level on the daily chart, where it previously reversed downward. However, trading above the 200-DMA indicates underlying strength. The stock is in uncharted territory on the weekly chart, suggesting potential bullish momentum. The RSI on the daily timeframe remains above 50, indicating positive market sentiment. Given this setup, a breakout above Rs 1800 could drive the stock higher toward Rs 1900-2070, with a strict stop loss at Rs 1670."

Brokerage Nirmal Bang has assigned a price target of over Rs 2,000 to the banking stock. 

HDFC Bank's core business is valued at 2.5 times September 2026E adjusted book value. Post adding subsidiary value per share of Rs 215.50 at 15 per cent holding company discount, the brokerage has derived a target price of Rs 2026 for HDFC Bank. 

"We believe this target multiple adequately captures a loan and earnings CAGR of 11.5 per cent and 11.9 per cent, respectively over FY24- FY27E, which results in RoA/RoE of 1.9 per cent/ 15 per cent in FY27E," Nirmal Bang said.

A R Ramachandran, Sebi registered independent research analyst said, "HDFC Bank stock price is bearish on the Daily charts with strong resistance at Rs 1810. A Daily close below the support of Rs 1764 could lead to a fall till Rs 1672 in the near term."

Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas is bullish on the stock. "HDFC Bank stock has broken out of a six month consolidation on the upside. Potential upside is seen with targets from Rs 1980 to Rs 2000. Strong support is placed at Rs 1720 - Rs 1700," said Gedia. 

Brokerage CITI has maintained its Buy call on the private lender with a target price of Rs 1990. 

"HDB Financial has filed for an IPO to comply with mandatory listing requirements and raise growth capital. HDB is a leading, granular, and diversified NBFC-UL with an AAA credit rating. Post-issue, HDB’s valuation at 3-4 times is expected to represent 2.8-4.3% of HDFC Bank's market capitalization," said CITI. 

HDFC Bank owns 94.36 percent stake in HDB Financial Services.

Jigar S Patel, manager at Anand Rathi said, "Support will be at Rs 1755 and resistance at Rs 1810. A decisive move above the Rs 1810 level may trigger a further upside of 1875. The expected trading range will be between Rs 1755  to Rs 1875 for the short-term."

Jignesh Shial, Director - Research; Head of BFSI Sector at InCred Capital said, "We like HDFC Bank’s unconventional outlook at slowing growth with a higher focus on improving NIM along with a larger scope of improving operating leverage and stable asset quality. The widespread and consistent branch expansion by HDFC Bank, especially in the rural and urban regions (+2,750 branches added since FY22), will be a significant catalyst in propelling granular and sticky retail deposits as well as gain momentum in better yield rural advances."

"HDFC Bank (2.5xFY26F PBV) continued to trade at a discount to ICICI Bank (2.8xFY26F). With a deposit push coming from the regulator and banks alike, we believe HDFC Bank is in a better position," added Shial. 

Mirae Asset Capital Markets in its November update has assigned a price target of Rs 1950 to the HDFC Bank. 

"India’s largest private-sector bank post-merger with HDFC Ltd, boasts a strong CASA ratio and a well-balanced loan book. Its ability to maintain robust growth in both retail and wholesale lending segments solidifies its position as a market leader," said Mirae Asset.