Global brokerage firm BofA downgraded the stock of HDFC Bank to ‘neutral’ from ‘buy’ resulting in the decline of bank’s shares nearly a percent to Rs 1,622 a piece on Wednesday.
Further, the target price was also reduced from Rs 1,850 to Rs 1,830 per share, citing that most of the positives were already priced in.
BofA analysts expect HDFC Bank stock’s risk-reward to be in the narrow range over the next 12 months after the stock rallied 20 per cent from February lows driven partly by index weight optimism.
The downgrade comes after HDFC’s stupendous rally seen from February lows when investors grew wary around HDFC Bank’s deficit deposit figures post its merger with erstwhile HDFC.
“We are navigating a tricky FY25 – wherein risk-reward is capped in the near-term. We expect catalysts to start playing out only in FY26. Moreover, a shallow rate cut cycle would delay NIM recovery for HDFC Bank,” the brokerage firm noted.
Notably, so far this year, HDFC stock declined over 4%, underperforming benchmark Nifty 50’s 11% rise during the same period.
Earlier, HDFC Bank had hit a 52-week high of Rs 1,791 apiece on July 3, 2024 fueled by hopes of increasing weightage in the MSCI EM index.
For the June-ended quarter (Q1FY25), deposit base grew by 24.4% on-year to Rs 23.8 lakh crore. Excluding the merger’s impact, deposits grew by 16.5% over the past year.
Its gross advances registered a 52.6% on-year increase to Rs 16.3 lakh crore, while it rose by 15% YoY if merger impact was excluded.
On an average basis, the bank’s advances under management were Rs 25 lakh crore for the June 2024 quarter, up 54.1% from Rs 16 lakh crore in the June 2023 quarter.