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HDFC Bank reported fairly strong quarterly results over the weekend, but shares of the country's largest private sector lender declined over 1 per cent on Monday afternoon. This even as the broader BSE Sensex was up 0.5 per cent.
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Private banks are trading at a price-to-book (P/B) valuation of 2.3 against the 10-year average of 2.5. On the other hand, the PB of PSU banks is at 1.2 against the long term average of 0.8.
Financial metrics that stood out in the industry gave HDFC Bank a premium valuation that was competitors envy. Now that it resembles its peers, the valuation may also remain aligned.
HDFC Bank shares fell as dip buyers were insufficient following Wednesday's crash, resulting in a loss of Rs 1.3 lakh crore in market capitalisation. Investor concerns include flat NIM despite ICRR withdrawal and decline in LCR. Deposits grew slowly compared to guidance. Jefferies sees potential in HDFC Bank's valuation and emphasizes NIM expansion for stock movement. Nomura downgraded the stock due to funding mix challenges.