FIIs Make Big De­posit in HDFC Bank

Pri­vate lender’s scrip rises to record high, over­tak­ing RIL as sec­ond-most valu­able com­pany

The Economic Times - - Front Page -

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.

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