Let us look at the performance of both the stocks over a 20-year period as it gives a good impression after factoring in — Inflation, Bull Run, Slow down, Policies, etc.
Stock Return: ~ 26500%
Stock Return: ~9000%
From this, we can make some deductions that can aid how & where our capital should be:
- HDFC Bank has grown from one of the innovative private sector banks in the early 2000s to a bluechip representative of the Indian Banking space
- The returns are excluding the dividends the company has provided to its share holders
- One of the notion is that, any entity after becoming a Large Cap is unable to grow fast. This trend though has been ducked by HDFC Bank, ICICI Bank, and Axis Bank
- Federal Bank no doubt is an upcoming mid-sized bank that is going to be large cap in the future
- Federal bank has partnered with Amica Fintech to form the neobank applications to form Jupiter, to tap into the new generation of savvy bankers
- Federal Bank has a healthy Capital Adequacy Ratio and Operates at a Good Profit
- Federal Bank has a loyal Investor in the form of Rakesh Jhunjhunwala (Big Bull or Indian Warren Buffett)
- Federal Bank is one of the few well run banks that has the stock price below Rs. 100
- HDFC Bank along with the entire space has bet heavily on new age technologies like Data Science, Artificial Intelligence, Blockchain inorder to improve its quality of service and maintain its lead in the Indian Banking space
Owing to this, it would be prudent to stick with HDFC Bank of you are an exiting investor.
If you are a new equity investor, go through the Annual Report and performance of both the banks prior to making a final call based on your goals, capital available and risk appetite.
So, plan your investment accordingly
Hope this helps
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