HDFC Bank shares hit 52-week low, oversold on charts; can they recover?

Shares of private sector lender HDFC Bank Ltd hit their 52-week low in early trade today, extending losses from last week post Q3 earnings. HDFC Bank shares fell 1.26% to their yearly low of Rs 1459.95 against the previous close of Rs 1478.65 on BSE. The banking stock is trading in the oversold territory as the relative strength index (RSI) of HDFC Bank stands at 24.5.

The stock fell 10% last week after the bank reported earnings for the quarter ended December 2023 on January 16. HDFC Bank stock breached the 52-week low of Rs 1460.55 today reached on October 26, 2023.

Market cap of HDFC Bank fell to Rs 11.12 lakh crore amid a rally in the broader market.

Total 1.04 lakh shares of the firm changed hands amounting to a turnover of Rs 15.18 crore on BSE. HDFC Bank stock has a one-year beta of 0.5. This signals the stock has low volatility.

The large cap stock is trading lower than the 5 day, 10 day, 100 day, 150 day and 200 day moving averages.

The big correction in the banking heavyweight post Q3 earnings was not expected and has unnerved many investors . Here’s is a look at the outlook of the stock amid the ongoing correction.

Global brokerage CLSA has maintained its buy rating on the counter with a target of Rs 2,025 per share. The brokerage has interacted with over 20 clients after Q3 earnings. "While most domestic clients were unhappy, we felt that it was slightly different for foreign investors, many of whom believe that we are near the end of the EPS cuts cycle. Key concerns, though, were about deposits and NIM, or net interest margins.”

Brokerage KR Choksey has assigned a target price of Rs 1950 on the banking stock.

"We value the Bank's standalone business at 2.2 times FY26E P/ABV to Rs 1,716 and the subsidiaries at Rs 233, taking the total value to Rs 1,950 (earlier Rs 2,060 per share), implying an upside of 26.8% from the current price. Accordingly, we maintain a "BUY" rating on the shares of HDFC Bank," it said.

Nuvama has downgraded the stock to ‘hold’ post Q3 earnings.

"We are cutting earnings by 5–6 per cent for FY25E–FY26E. While the cut in core earnings is higher at 8 per cent due to a 4 per cent cut in loan growth, it is partially offset by an upward revision of non-core items. The Bank has exhausted its LCR, will need to lower its LDR and is running slower than guidance on deposit growth. In all, we are lowering the target to Rs 1,730 from Rs 1,770," said the brokerage.

Financial Services firm Motilal Oswal has assigned a target of Rs 1950 to the Banking stock.

The brokerage said HDFC Bank’s margin stood largely flat, which was slightly below its expectations, even as the Bank deployed excess liquidity and significantly drew down the LCR ratio.

"Loan growth was healthy driven by growth in retail and continued traction in Commercial and Rural Banking. Asset quality ratios improved while provision coverage ratio (PCR) also inched up to 75 per cent. The Bank has continued to maintain 0.6 per cent buffer of floating plus contingent provisions, which provides additional comfort. Management suggested that NIMs will improve gradually over the coming years, which along with an improvement in operating leverage will enable the Bank to deliver healthy return ratios," the brokerage added.

HDFC Bank reported a 34 per cent rise in its standalone net profit to Rs 16,373 crore for the third quarter ended December 2023 against Rs 12,259 crore in the corresponding quarter of the previous fiscal year.

Total income rose to Rs 81,720 crore in the October-December quarter of FY24 against Rs 51,208 crore in the year-ago period.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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