HDFC Bank downgraded to 'Hold' by MarketsMOJO due to mixed performance and bearish trend

HDFC Bank, one of the largest private banks in India, has recently been downgraded to a 'Hold' by MarketsMOJO on February 12, 2024. This decision was based on various factors, including the company's strong long-term fundamental strength, healthy growth, and high capital adequacy ratio.
The bank has shown an average Return on Assets (ROA) of 1.75%, indicating a strong long-term fundamental strength. Its net profit has also grown at an annual rate of 23.03%, showcasing healthy growth. Additionally, HDFC Bank has a high Capital Adequacy Ratio of 17.12%, which signifies high buffers against its risk-based assets.

In December 2023, the company declared very positive results with a growth in interest of 65.27%. It has also consistently declared positive results for the last 10 quarters, with its NII(Q) and INTEREST EARNED(Q) being the highest at Rs 28,471.34 crore and Rs 70,582.61 crore respectively. Its CREDIT DEPOSIT RATIO(HY) is also the highest at 110.48%.

With a ROA of 1.6, HDFC Bank has a very attractive valuation with a 2.5 Price to Book Value. The stock is currently trading at a discount compared to its average historical valuations. However, in the past year, while the stock has generated a return of -16.05%, its profits have risen by 33.8%.

The company also has high institutional holdings at 83.11%, indicating that these investors have better capability and resources to analyze the fundamentals of companies compared to most retail investors. With a market cap of Rs 10,65,809 crore, HDFC Bank is the biggest company in the sector, constituting 36.36% of the entire sector. Its annual sales of Rs 231,987.17 crore are also 31.58% of the industry.

However, the stock is currently in a bearish range, with its technical trend deteriorating from Mildly Bearish on February 12, 2024. Multiple factors, such as MACD, Bollinger Band, and KST, are currently bearish for the stock.

Moreover, HDFC Bank has also underperformed BSE 500 in the last 3 years, 1 year, and 3 months, generating -16.05% returns in the last 1 year. Therefore, considering all these factors, MarketsMOJO has downgraded the stock to a 'Hold'.