HDFC Bank shares continue to slide; what should investors do after 12% fall in 2 days?

HDFC Bank share price: Nonetheless, the analyst expects a recovery in the stock going ahead and sets a one-year target of Rs 1,700 on the stock, implying gains of nearly 11 per cent from the last close of Rs 1,536.9.

The lower LCR and slower deposit growth may limit NIM's expansion going forward. Image credit: Reuters

HDFC Bank share price: HDFC Bank shares continued to slide for the second straight day in Thursday's trade (January 18), in line with the broader market weakness. At around 9:32 am, shares of the biggest private lender traded 2.24 per cent lower at Rs 1,502.5 apiece.

Nonetheless, considering the day's low of Rs 1,480.25, the stock is just a per cent away from marking the 52-week low price of Rs 1,460.25 hit on October 26, 2023.

Dr. V K Vijayakumar, Chief Investment Strategist, at Geojit Financial Services, said that at elevated valuations, the market needs only a trigger for a sell-off, and yesterday this trigger came in the form of HDFC Bank’s worse-than-expected results.

What investors should do after a 12 per cent fall in 2 days?

Futher dips in HDFC Bank will provide buying opportunities for long-term investors, suggests Vijayakumar. Research Analyst Ajit Kabi at LKP Securities on the HDFC Bank Q3 results said the NIM or net interest margin at the lender of 3.6 per cent led to the huge fall in the stock. Further, the analyst mentioned that while the quarterly performance seemed at par, the higher corporate debt restructuring (CDR) (110%) and lower liquidity coverage ratio (LCR) (110% in 3Q against 126% in 2Q) are causes for concern.

The lower LCR and slower deposit growth may limit NIM's expansion going forward, Kabi added.

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Nonetheless, the analyst expects recovery in the stock going ahead and sets a one-year target of Rs 1,700 on the stock, implying gains of nearly 11 per cent from the last close of Rs 1,536.9.

InCred Equities in its report on the stock suggested an 'Add' rating on the counter with a target price of Rs 2,000. The brokerage noted that elevated cost of deposits and pressure on margins would be common issue for all banks in the coming quarters, nonetheless it believes HDFC Bank is better placed due to its improved penetration providing portfolio granularity and command over loan pricing.

"We expect HDFC Bank to be a ~2% RoA and ~16% RoE story. HDFC Bank is our high-conviction ADD-rated stock with a target price of Rs2,000. We have valued the standalone bank at ~2.7x FY25F BV and its subsidiaries at Rs200/share. Slow growth and weak margins are key downside risks to our thesis," added the brokerage.

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