Should you buy HDFC Bank shares: Leaving giants of international banking like Morgan Stanley, HSBC, and Bank of China behind, this bank will become the 4th largest bank in the world.

Source: Bloomberg

In the next 5 minutes, I’ll walk you through the most important points about HDFC Bank, including fundamentals, technicals, analyst ratings as well as retail sentiment on Stocktwits, which will help you in your decision-making process.

HDFC Bank was incorporated in 1994, and within 30 years, it has become India’s biggest private sector bank. Not only this, HDFC Bank is India’s 3rd largest listed company and has around 30% weightage in Bank Nifty. 

In the last 1 year, HDFC Bank has given returns of 28%. The biggest reason behind this is the merger with HDFC Ltd. 

On 4th April 2022, HDFC Bank announced its intention to merge with its parent company, HDFC Ltd. With this reverse merger, HDFC Ltd, which is India’s biggest home loan provider, will become a part of HDFC Bank.

This combined entity will have a balance sheet in excess of 25 Lakh Crore, and with this, it will become the 4th largest bank in the world, leaving giants of international banking – Morgan Stanley, HSBC, and Bank of China behind.

Let’s talk about operations now. After the merger, within HDFC Bank’s loan book, housing loans will see exponential growth. Home loans are generally less risky as there is some sort of collateral involved. This will result in HDFC Bank’s asset quality improving and possibly a reduction in borrowing costs.

With HDFC Ltd’s 80 Lakh customer base and robust distribution network, HDFC Bank can cross-sell its product lines like mutual funds, credit cards and insurance. 

When it comes to Fundamentals, you probably won’t find a better bank in India than HDFC Bank. Even after once-in-a-lifetime events like Covid, HDFC Bank’s profits have shown a 20% CAGR growth in the last 5 years. 

When it comes to Valuations, the stock is trading at 16x one-year forward eps. When compared to its historical average, it’s trading at a discount of 15-20%.

Industry-wide lowest NPAs, Excellent return rations and a great dividend track record are a few of the key positives for the bank. 

Coming to technicals, the stock is at an all-time high and trading above all key moving averages. Momentum indications like RSI and MACD also show a positive sign for the stock. 

Brokerages are super bullish on the HDFC Bank. 42 out of 43 analysts have a buy rating with an upside of ~+19% from its current price. Bernstein has the highest target on HDFC Bank of Rs.2,300 per share. Axis Capital, Morgan Stanley and Macquarie have targets of 2,150 to 2,110

While knowing all the above is essential, knowing what retail investors think about the HDFC Bank is also important. Let’s open the HDFC Bank stream on Stocktwits. 

Abhijit Paul, who is a SEBI registered advisor on Stocktwits, has said that in the short term, we can see some profit booking after the recent rally in stock price. Long-term charts still show a bullish trend for the stock, and investors can buy and hold the stock. 

Similarly, Orchid research on Stocktwits also has a bullish view of HDFC Bank but has stated a few risks like – A slowdown in the Indian economy, Increased competition from other banks or Regulatory changes.

Now, let’s view our Stocktwits scorecard. Across all parameters of Fundamentals, Technicals, Analyst Rating and retail sentiment, HDFC Bank gets a big thumbs up. 

So this wraps up the techno funda review on HDFC Bank. If you are bullish on the stock, share this article. If you have a contradictory view on this analysis, drop a comment. 

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