IGI Logo

HDFC Bank Ltd

Investment Rationale

* Countries largest private bank: HDFC Bank is the largest private sector bank with market share of 14.42% in advances and 11.41% in deposits. The bank has presence in core financial segments such as banking, insurance, asset management and securities.

* Improving CD ratio: Following the merger with HDFC, the bank's credit-to-deposit (CD) ratio experienced significant deterioration, reaching levels as high as 108.4%. However, this trend has recently begun to reverse, with the CD ratio falling to 100.7% in Q2 FY25, as the bank has increased its focus on deposit growth.

* Asset quality continues to remain Robust: Asset quality saw marginal deterioration during the quarter but overall asset continues to remain robust as both Gross NPA (GNPA) and Net NPA (NNPA) remain at lower end of its historical range. And is expected to remain around current levels only.

* Re-rating potential: The elevated credit-deposit (CD) ratio has been a significant challenge for HDFC Bank, adversely affecting its margins and growth, which in turn has led to a decline in its valuation multiple. However, as the bank gradually improves its CD ratio, we can expect to see a gradual enhancement in margins over the next few quarters, and the potential for a re-rating should not be overlooked.

Technical Chart

Buy HDFC Bank Ltd CMP : 1,798 Acc. Range : 1,720-1,810 Target : 1,920-2,008 

Please refer disclaimer at https://www.religareonline.com/disclaimer

SEBI Registration number is INZ000174330