FIIs Make Big Deposit in HDFC Bank
Private lender’s scrip rises to record high, overtaking RIL as second-most valuable company
Sanam Mirchandani & Anandi C
Mumbai: Foreign investors made the biggest single-day purchase of shares in nearly two years on Friday, helping private sector lender HDFC Bank rise to a record high and overtake energy behemoth Reliance Industries as the second-most valuable company on the market.
Broader market indices rose to levels not seen since September last year as RBI allowed FII purchases in HDFC Bank late on Thursday evening after a temporary freeze. HDFC Bank posted its biggest one-day gain since May 2014, 9% intra-day before ending up 3.6% at ₹ 1,377. FIIs bought ₹ 8,043.14 crore of shares, most of it in HDFC Bank. This was their big- Scrip-ting a Fresh Rally gest single-day purchase since April 2015, when they bought ₹ 16,358 crore. RBI clamped down on FII buying in HDFC Bank later on Friday afternoon and the stock slipped from the highs of ₹ 1,450. But Sensex and Nifty continued to climb
and ended the day at five-month highs. The Nifty ended at 8,822 while Sensex closed at 28,469. The Bank Nifty also rose to its highest since January 27, 2015 to close 1.52% higher on Friday.
FII ownership in private sector banks is capped at 74%. Mutual funds, who held HDFC Bank shares worth Rs 33,000 crore as of December, were sellers in the buying frenzy by FIIs, according to money managers. Delivery-based volume in HDFC Bank was Rs 9,972 crore.
“The available amount was consumed quickly by foreign investors. Funds sold in cash market and bought in futures at a cheaper price,” said Raamdeo Agrawal, joint MD at Motilal Oswal. Money managers expect the stock to continue to trade at premium valuations due to its strong fundamentals. HDFC Bank and Reliance Industries have been trading places on the market cap rankings since November 2016 when the private sector lender pipped RIL for the first time to become India’s second-most valuable company. It has repeated the feat four times in February alone, underscoring investors’ appetite for private sector banking stocks who are big beneficiaries of a boom in consumer lending and the push towards digital transactions.
In five years to FY16, HDFC Bank’s net profit has grown at 25% CAGR and it has historically pro- duced average profit growth of 30%. The stock has surged 102 times since listing in 1997.
According to ETIG Database, HDFC Bank trades a price-to-book value of 4.57, the highest among private banks, which trade at an average P/B of 2.2 times.
Agrawal of Motilal Oswal said the stock is a reasonable buy at current levels for a 15% annual return.
Sanjiv Bhasin, executive vice president-market and corporate affairs at IIFL echoed a similar view.
“Given that bond yields have hardened and PSU banks are out of favour, there is continued interest in private banks despite high valuations. HDFC Bank will continue to have premium valuation,” said Bhasin. HDFC Bank’s weightage in the Nifty is 6.5% and 30% in the Bank Nifty. The weightage of banks and financials in the Nifty is 29%. HDFC Bank shares saw the highest traded volumes on the National Stock Exchange (NSE) with 10.06 crore shares worth Rs 14,264 crore changing hands. This accounted for 40.25% of the total equity turnover of Rs 35,435 crore on the exchange. As per brokers, this is the highest single stock turnover since NSEs inception.