HDFC Bank stock expected to re-rate in next 12-18 months, says Motilal Oswal’s Nitin Aggarwal
HDFC Bank’s stock is expected to re-rate in the next 12-18 months, despite the hit it has taken to its book value due to its merger with HDFC Ltd, according to Nitin Aggarwal of Motilal Oswal Financial Services.
Aggarwal said that the merged entity is well-positioned to achieve a 2 percent Return on Assets (ROA) by FY26, and that there will be a gradual improvement in earnings. He also highlighted the liquidity that the bank has gained from the merger, which can help to grow the business.
However, Aggarwal also cautioned that execution remains critical for the merged entity, given its large size. He said that investors will be watching out for deposit growth, which has slowed down after a strong run in Q1. The performance of the bank on deposits and advances will also be key to evaluate the growth of the merged entity along with margins.
For the next one quarter, Aggarwal would prefer to wait and see how the bank deploys the excess liquidity that it has built up post-merger.
Nomura, a foreign broking firm, has downgraded its rating on HDFC Bank to Neutral after the bank’s analyst call to share particulars of the merged entity. Nomura analysts cited the downward adjustment to the incoming net worth of HDFC Ltd and the potential pressure on NIMs over the next two to three quarters as reasons for the downgrade.
Overall, Aggarwal is bullish on HDFC Bank’s long-term prospects, but he believes that investors should wait and see how the bank executes in the near term.
- 22 Sep
Sai Silks’ IPO attracts lukewarm response, analysts raise concerns
Sai Silks Kalamandir's IPO received a lukewarm response with a subscription rate of just 0.07 times. Analysts have raised concerns about the company's high debt levels, intense competition in the industry, and the fact that half of the issue size is an OFS. The company also has 30 percent of its promoter holdings pledged. Despite these concerns, the company's management is confident about its growth prospects.
- 22 Sep
PSU bank shares make a comeback on JPMorgan’s index inclusion decision
PSU bank shares made a strong comeback on September 22, after JPMorgan's decision to include Indian government bonds in its emerging-market index boosted investor sentiment. However, analysts are urging caution with regard to the PSU bank space, citing the risks of investing in smaller PSU banks and the potential for divestment in some of the larger banks. Investors should carefully consider the risks and rewards before investing in PSU bank shares.
- 22 Sep
SEBI penalizes 11 entities for non-genuine trades in illiquid stock options segment
The Securities and Exchange Board of India (SEBI) has penalized 11 entities for non-genuine trades, fined 2 entities for flouting disclosure rules, and suspended the registration of 1 research firm for violating regulatory norms. SEBI's actions are a reminder to market participants that they must comply with all regulatory requirements. Investors should be aware of these risks and take necessary precautions to protect themselves.
- 22 Sep
Zaggle Prepaid Ocean Services Stock Makes Weak Debut, Analysts Recommend Selling
Zaggle Prepaid Ocean Services stock made a muted debut on bourses on September 22, listing at a premium of just 0.6% over the IPO price. Analysts have recommended selling the stock on the opening day, citing its high P/E valuation, debt-to-equity ratio, and negative cash flow.
- 22 Sep
Market Summary for September 22, 2023
Indian equity markets closed in the green on September 22, 2023, supported by buying in select banking and automobile stocks. Sectors such as pharma, information technology, and metals were the major drags. Options data suggests a sideways to positive momentum in the near term.