HDFC Bank shares tank 6% post Q3 results, lose Rs 77,000 crore m-cap. Here’s why

Shares of HDFC Bank Ltd cracked 6 per cent in Wednesday’s trade, erasing over Rs 76,000 crore in market capitalisation following a mixed set of December quarter results. HDFC Bank reported a beat on net interest income (NII) and trading gains but a miss on fees and credit cost.

HDFC Bank shares tank 6% post Q3 results, lose Rs 77,000 crore m-cap. Here’s why

The bank made a big contingency provision towards AIF of Rs 1,200 crore, even as the value was 5 per cent higher than the carrying value, Nuvama Institutional Equities said while citing some offset due to a big tax reversal.

We are cutting earnings by 5–6 per cent for FY25E–FY26E. While the cut in core earnings is higher at 8 per cent due to a 4 per cent cut in loan growth, it is partially offset by an upward revision of non-core items.

The bank has exhausted its LCR, will need to lower its LDR and is running slower than guidance on deposit growth. In all, we are lowering the target to Rs 1,730 from Rs 1,770,” Nuvama said while downgrading the stock to ‘HOLD’.

The third most valued stock plunged 6.48 per cent to hit a low of Rs 1570 on BSE. The market capitalisation of HDFC Bank dropped to sub-Rs 12 lakh crore level to Rs 11,98,094.09 crore against Tuesday’s Rs 12,74,740.22 crore, down nearly Rs 77,000 crore.

Also read: HDFC Bank Q3 results: Profit jumps 34% to Rs 16,373 crore, meets Street expectations; key takeaways

Phillip Capital said the results were in line on back of drawdown of excess liquidity in the balance sheet but said tight liquidity condition is creating challenge for the bank to mobilise deposit.

“The ask rate for deposit outstrip the current run rate, which may transpire into moderation in credit growth.

Decline in liquidity coverage and rising LDR, limits the scope for balance sheet manoeuvrability to defend margin,” it said while suggesting a target of Rs 1,920 on the stock.

Motilal Oswal said the HDFC Bank margin stood largely flat, which was slightly below its expectations, even as the bank deployed excess liquidity and significantly drew down the LCR ratio.

“Loan growth was healthy driven by growth in retail and continued traction in Commercial and Rural banking. Asset quality ratios improved while PCR also inched up to 75 per cent. The bank has continued to maintain 0.6 per cent buffer of floating + contingent provisions, which provides additional comfort.

Management suggested that NIMs will improve gradually over the coming years, which along with an improvement in operating leverage will enable the bank to deliver healthy return ratios,” it said while suggesting a target of Rs 1,950 on the stock.

InCred Equities said elevated cost of deposits and pressure on margins would be common issue for all banks in the coming quarters and that HDFC Bank is better placed due to its improved penetration providing portfolio granularity and command over loan pricing.

8. Sector-Specific Considerations for HDFC Bank

   • Banking Industry Trends
   • Regulatory Environment for Financial Institutions
   • Market Positioning Amidst Sector Dynamics

9. Global Economic Impact on HDFC Bank

   • External Factors and International Markets
   • Economic Indicators Influencing Banking Stocks
   • Cross-Border Implications for HDFC Bank

10. Investor Reaction to Market Volatility

    • Understanding Investor Sentiment
    • Behavioral Responses to Stock Price Movements
    • Impact on Trading Volumes and Liquidity

11. Analyzing Long-Term Investment Strategies.

    • Fundamental Analysis of HDFC Bank
    • Value Investing Considerations
    • Identifying Opportunities Amidst Market Fluctuations

12. Communications and Transparency

    • Communication Strategies by HDFC Bank
    • Transparency in Financial Reporting
    • Building and Maintaining Investor Trust

13. Potential Catalysts for Stock Recovery

    • Factors That Could Positively Influence Share Prices
    • Opportunities for Rebuilding Market Confidence
    • Catalysts for Reversing the Negative Trend

14. Risk Mitigation Strategies for Investors

    • Diversification Approaches
    • Risk-Adjusted Portfolio Management
    • Long-Term Investment Strategies Amidst Market Uncertainty

15. Monitoring and Adjusting Investment Strategies

    • Continuous Evaluation of Market Conditions
    • Reassessing Investment Thesis
    • Staying Informed for Informed Decision-Making

The decline in HDFC Bank shares by 6% after the release of its Q3 results has led to a loss of Rs 77,000 crore in market capitalization. Several factors may be contributing to this negative trend.

It could be attributed to the bank’s financial performance in the third quarter, which might have fallen short of market expectations or faced challenges. Investors often react to quarterly results, and if the numbers are not in line with projections, it can lead to a sell-off, impacting the stock price and market capitalization.

Additionally, macroeconomic factors, industry trends, or specific issues within the banking sector could also be influencing the decline in HDFC Bank’s shares. Investors and analysts typically scrutinize financial reports to assess the health and performance of a company, making stock prices sensitive to such announcements.

Furthermore, market sentiment and broader economic conditions can play a significant role in the performance of banking stocks. If there are concerns about the overall economic outlook, regulatory changes, or uncertainties in the financial sector, it can contribute to a decline in share prices.

It’s essential to delve into the specifics of HDFC Bank’s Q3 results to understand the reasons behind the market’s reaction. Factors such as net profit, asset quality, loan growth, and provisions for bad loans are crucial indicators that investors closely examine. Any unexpected variations or weaknesses in these areas can trigger a sell-off.

Investors also pay attention to management commentary and guidance provided during earnings calls. If there are concerns or uncertainties expressed by the bank’s leadership regarding future prospects, it can impact investor confidence.

Additionally, external factors such as global economic conditions, interest rate movements, and geopolitical events can influence the stock market and, consequently, the performance of individual stocks, including HDFC Bank.

It’s important for investors to stay informed about the latest developments and trends in the banking sector to make informed decisions. Stock market fluctuations are part of investing, and understanding the underlying reasons for such movements can help investors navigate the dynamics of the financial markets more effectively.