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Below Quote on HDFC merger By Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services

HDFC Bank has been underperforming the Nifty for the last 3 years in spite of its decent growth. This underperformance is likely to change post merger. The bank which has an enviable track record and excellent execution capabilities will gain from the synergy unleashed by the merger. Presently HDFC Bank is trading at 13.5 times earnings which is a discount to the 5-year average PE of 20. From the Price to Book perspective also the stock is trading at 2.2 times vs the 5-year average PB of 3.5.
Institutional selling to comply with the 10% holding ceiling has been weighing on the stock. This will be over once the merger is affected. The prospects of the merged entity look very bright and this will attract more institutional investment from sector specific funds and ETFs which are not bound by the 10% ceiling.

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