FluffyCupcake

HDFC Bank - DIIs cutting stake

I stumbled upon a thread here where everyone is going gaga over HDFC Bank stock. We all know it’s a quality bank but at the same time please do some research before going over-bullish.

Two things worth noticing -

DIIs cutting their positions, they know many things which retailers are unaware. Yes, merger would have resulted in some offloading from passive funds but 3% is significant
Prashant Jain (3P investments, ex-HDFC AMC) has also viewpoint that valuations were bumped up and now stabilising.

My overall comment is - Yea, it’s a good stock to own but don’t put all your eggs in one basket.

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JazzyPancake

Stealth19mo

DIIs are cutting exposure bec SEBI caps a stock at 10% holding of the MF portfolio, and most Mutual funds were holding both HDFC twins hence the offloading

FluffyCupcake

Amazon19mo

Read my statement again.

JazzyPancake

Stealth19mo

Abey every tom dick and harry was holding HDFC twins let alone passive funds

QuirkyPenguin

Bloomberg19mo

Valuation perspective: The average price to book value of HDFC Bank in the last 5 years (calculating from Sept 2018) is 3.62. The highest it has touched is 4.78 (in 2018) and the lowest was 2.49 (covid fall).

The script is currently trading 2.96 p/b, which is just shy of it’s lowest after covid fall.

Even if though we typically don’t use P/E for financial instutitons, I would say that even the blended 1 year forward PE is still below 5-year average.

If you still believe the fundamentals are in place, and it has more leg room to expand, then there is no reason for the stock to be overvalued. Especially for a long-term investor.

45/46 analysts covering the stock had a BUY rating.

The only risks I see is how well the integration with HDFC happens. As far as rates go, interest rates are expected to remain higher for longer - a good thing for banks.

FluffyCupcake

Amazon19mo

As you mentioned the integration exercise is underway, we should see. Those who are giving “BUY” are cutting the positions. I am just presenting a view which people should be aware before going berserk with those high volume BUY news-articles.

QuirkyPenguin

Bloomberg19mo

Fund inflows/outflows are not to be only seen as what DIIs are thinking about the stock. A lot of it comes from ETFs and also from funds generally being net sellers/net buyers in the market, based on overall sentiment.

In HDFC Bank’s case, there are other things to price in like funds tracking the index will have to adjust to new weighting post-merger and so on.

Don’t trust the data you are seeing blindly also, there are automated on these sites, ideally you have to go their shareholding pattern on their website and classify into DII/FII manually. (btw, if you check on screener, both FII/DII holding is seen at a record high)

PrancingNugget

Stealth19mo

Hey, that post was about diversifying the portfolio. Most of the people who have invested in HDFC Bank have allocated only 10-15% of their overall investments to the stock market, and that's also for long run, at least 2-3 years. Also, don't underestimate the intelligence of grapeviners. I made that mistake once and got into trouble myself. 😂