The largest private-sector bank in the country - HDFC Bank (NS:HDBK), having a market capitalization of INR 12,70,504 crore is one of the favorite counters of FIIs. As per the latest filings, they hold a 40.79% stake in the bank, up from 33.38% in June last year. In fact, mutual funds have also ramped up their holdings from 17.6% to 21.48% in the year ended June 2024.
Despite being liked by institutional investors, the stock hasn’t performed well in the last one year, delivering a meager 1.3% return (excluding dividends), compared to the Nifty Bank’s return of 12.7%.
Image Source: InvestingPro+
However, if you look at the valuations of the bank, value seekers might find it a suitable opportunity to go long from the current levels. InvestingPro’s fair value feature depicts INR 1,917 as the true worth of the stock, after taking 5 financial models into consideration including - DDM Stable Groeth, P/E Multiple, P/S Multiple, etc.
From the current market price (CMP) of INR 1,664, there is an upside potential of 15.2%, not at all bad for a mega-cap company. Investors can also see the consensus of all institutional analysts covering the stock. Here, the average target of all 41 of them is around INR 1,869 per share, which is also decently above the CMP.
If both the fair value and average analysts’ target are above the CMP, then investors can form a strong bullish view on the counter
The only thing that’s concerning is the financial health score, which is 2 out of 5. This score is given to the stock after carefully analyzing many financial parameters such as growth, cash flow, profitability, etc. Any score below 3 increases the risk of capital loss. Hence, investors can either wait for a further correction so that the valuation gap further widens or can invest in a staggered way to average out the cost in case the stock slips from here.
Read More: Here’s How to Take Advantage of AI for Your Stock Selection
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