Momentum Pick: Ahead of Q4 results, lucrative chart structure to trigger rally in HDFC Bank

The stock has given returns of more than 10% over a 12-month period and outperformed the Nifty50 which has returned 0.3% during this period according to Trendlyne data. HDFC Bank’s returns have also been a notch better than the Nifty Bank and Nifty Private Bank indices.

The stock is off its 52-week high of Rs 1,702 which it scaled in January, this year.

ETMarkets highlights important triggers that could see the stock sail through.

Technical View

Pravesh Gour: Buy | CMP: 1,664.95 | Target: Rs 1,750 | Upside: 5%

“The overall structure looks lucrative as it trades above its all-important moving averages. The counter witnessed the breakout of a triangle formation. Previously, it retested its breakout level at around Rs 1,530 and started a new leg rallying towards Rs 1,700+ levels,” Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd said.

“MACD (Moving average convergence divergence) is supporting the current strength, whereas the momentum indicator RSI (relative strength index) is also positively poised,” he added.

“On the upside, Rs 1,700 is the neckline and an immediate hurdle, above which we can expect a move towards Rs 1,750. On the downside, Rs 1,600 is a strong demand zone at any pullback,” Gour recommended.

Nilesh Jain: Buy | Target: Rs 1,730 | Upside: 4%
Another expert Nilesh Jain also holds a positive view on this stock. He recommends a buy on decline at levels up to Rs 1,640 for the price target of Rs 1,700-1,730. His view on this stock is for the April series. Jain is Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking.

The stock has traded with a 1-year beta of 1.02, which indicates average volatility.

Fundamental View
Sharekhan: Buy | Recommendation at Rs 1,653 | Target: Rs 1,920 | Upside: 16%

Sharekhan maintains a ‘Buy’ rating on the HDFC Bank shares with an unchanged price target of Rs 1,920. The stock was recommended at a price of Rs 1,653 This translates into a 16% upside from the price at which it was recommended.

Triggers
1) Sustained loan growth: Retail loan growth is expected to sustain as the demand environment is turning better across products, including two-wheeler loans where earlier demand was tepid. Personal loans and credit card spends continue to increase, led by higher discretionary spends, the report said.

2) The bank is likely to sustain a healthy growth in the CRB (Commercial & Rural Business) segment as it is adding new geographies and capturing the supply chain of unserved SMEs. We also expect corporate loan growth to sustain, driven by capex-led growth. Margin outlook:

3) There could be an uptick in margins over the next two quarters as the floating rate book (55% of total loans) gets repriced gradually on account of ongoing additional rate hikes, partially offsetting the increasing cost of funds.

3) Mobilisation of low-cost deposits at a faster pace: The largest Indian lender by market capitalisation will maintain its lead attracting deposits despite mid and small peer banks offering higher deposit rates, Sharekhan noted.HDFC Bank is the only large private bank to see deposit growth outpacing loan growth in the last three consecutive quarters.

Key Risks

RBI may not allow regulatory dispensation

Valuation
“The stock is trading at a 30% discount to its long-term valuation multiple. The risk of de-rating on a standalone basis appears to be quite low, given that the business performance is holding up well. The stock is currently trading at 2.7X and 2.3X its FY2023E and FY2024E core ABV, respectively,” the Sharekhan report said.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)