HDFC Group stocks: Once a favorite of Dalal Street, HDFC Group stocks are facing the indifference of investors. Continuous selling of foreign funds, premium valuations and change in leadership are believed to be the reasons for the weak performance in the stock market.
HDFC Bank, HDFC, HDFC Life and HDFC Asset Management Company (HDFC AMC) have underperformed in 2022 and in the past one to two years.
How many broken stocks in the last two years
Since January this year, HDFC Bank has registered a decline of 7 per cent, HDFC 12 per cent, HDFC Life 14 per cent and HDFC AMC 14 per cent. At the same time, there has been a weakness of 4.3 percent in Nifty during this period.
In the last two years, HDFC Bank has seen a strength of 16 per cent, while Nifty has gained 48 per cent and Nifty Bank index has gained 22 per cent during this period. Mortgage lender HDFC recorded a gain of 5 per cent and HDFC Life by 3 per cent during this period. The group’s newest listed company HDFC AMC has registered a weakness of 32 percent during this period.
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Due to these reasons, the decline continues
In a report in The Economic Times, Nitin Raheja, Head (Discretionary Equities), Julius Baer Wealth Advisors, said, “Over the past few years, all the businesses of the group, including banking, mortgage finance, asset management and insurance, have seen growth, management changes, technology-related Problems have been faced in terms of issues. Also, all its shares remain in the value correction zone. Given the large share of FPIs, continued selling by FPIs is not helping the performance of HDFC Group stocks.
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ever-decreasing valuations
For nearly a decade, HDFC Group stocks have been trading at a premium valuation, as they have been considered a sustainable bet due to strong earnings growth and high corporate governance levels.
HDFC Bank was trading at more than four times its book value at the beginning of 2020. At that time it was the most expensive bank globally. Due to heavy selling, its valuation has come down by 20 per cent in the last two years. The holding of foreign investors has come down to 37.47 per cent from 39.35 per cent last year.
There are better options in the market
Sanjeev Hota, Head (Research), Sharekhan, said, “In the last two years, the market growth expectations and valuations have not been in sync. At the same time, the shares of its competing companies are getting at a deducted valuation, whose growth is either similar or better than that. Hence, the funds have reduced their positions in HDFC group stocks and have invested their money in this business with better risk-reward.”
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