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MUMBAI: HDFC Bank and HDFC — the biggest contributors to the stock market’s recent recordbreaking run — edged below the key long term technical indicator of 200-day moving average (DMA) on Wednesday.
When an index or a stock closes below the 200-DMA, it is considered a bearish signal.
Analysts said traders were cutting exposure to these stocks after their strong run with the broader market sentiment turning sour and interest rates set to firm up further.
HDFC’s shares ended down 1.35 per cent at Rs 1,831.15 on the BSE on Wednesday, below its 200-day simple moving average (SMA) of Rs 1,852.30.
HDFC Bank ended down 1.6 per cent at Rs 1,961.95, below its 200-day SMA of Rs 1,980.
Both have fallen below this widely-watched indicator for the first time in about 20 months.
Digant Haria, AVP-Research at Antique Stock Broking said HDFC Bank being one of the largest distributors of mutual funds, may see some impact from SEBI’s rule that mutual funds have to migrate to 100 per cent trail model of commissions.
Also, the directive that AAArated corporates have to borrow 25 per cent from retail may intensify the fight for deposits and may face challenges on the deposits front in an increasing interest rate environment.
Haria said parent HDFC may face challenges as overall housing finance space is not likely to do well in a rising interest rate environment.
“Both the stocks have given extraordinary returns and there is heavy ownership.
But despite these near-term concerns, the stocks may be bought on corrections as long-term view is bullish,” said Haria.
HDFC’s shares have surged 149 per cent in the last five years while HDFC Bank surged 233 per cent in the same period.
“Any fall in HDFC and HDFC Bank may be utilised to buy as there is no fundamental issue,” said Ambareesh Baliga, independent market expert.
HDFC has delivered compounded growth of 15.4 per cent in profit in the last five financial years while HDFC Bank has delivered a compounded profit growth of 16.2 per cent in the same period.
Consensus ratings on Bloomberg show that 46 of 51 analysts tracking HDFC Bank have a ‘buy’ rating on it, and consensus target price of Rs 2,449.56 implies another 25 per cent upside in the stock over the next year.
The consensus target price of Rs 2,200.83 on HDFC implies a potential gain of 20 per cent going forward.
Nearly 35 of the 41 analysts tracking HDFC have a ‘buy’ recommendation on it.
