The HDFC Bank stock has given a return of more than ~100% in the past 5years. Despite this, the last year has been tasking for the bank
From the graph below we can see that the stock has given a negative return(ruling out a dividend in June 2021)
This is ironic comparing the improvement in quarterly results for the largest private sector lender despite two waves of the Covid-19 Pandemic. The table below shows the net income & net interest that has been growing sequentially over the quarters.
With Budget 2022 approaching and the Federal Reserve hell-bent on pursuing interest rate hike to unwind the stimulus that has been ongoing for a long period, liquidity will be the key metric to watch out for.
Fiscal and Monetary Policy Intervention by the Government of India to support Rural Income, MSME, Real-Estate, and Low-Cost Housing.
Owing to this, HDFC and HDFC Bank are going to see a spur in lending. Also, with proper processes in place to screen for credit scores, documentation, etc. the bank is well poised to grow further in the coming financial year.
As an investor, this provides an opportunity as
- The risk of Non-Performing Assets(NPAs) are under control
- Stock is almost at the same level as a year back
- If the stock falls further (PE < = 15), it can provide a good entry point for a medium to long term investor
- There might be a rise in the stock in the runup to Budget 2022 with subsequent profit booking. This can again provide an entry scope for investors
Hope this helps
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- Budget must not compromise on income support, infra & housing, says HDFC Bank’s Abheek Barua
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- Low cost housing projects in India
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