Housing Development Finance Corp (HDFC), HDFC Bank and HDFC Life Insurance shares hit 52-week lows on Tuesday before making their way back to green territory. The recovery was in tandem with a rebound in the BFSI space following a decline that lasted five straight sessions.
HDFC Bank finished the day up 0.3 percent at Rs 1,327.1, after hitting a 52-week low of Rs 1,292 during the session. HDFC rose 1.5 percent to Rs 2,151.7 for the day. During the session, it fell to as low as Rs 2,046.3.
HDFC Life hit a 52-day low of Rs 497.3 before finishing the day up 1.9 percent. HDFC Asset Management closed 3.1 percent higher.
The Nifty Bank and Financial Services indices, however, are in the bear zone. A stock or index is said to be in the bear market when it falls at least 20 percent from its peak. Sustained foreign fund outflows have put pressure on financial stocks in the recent past.
"Valuations in Indian financials are getting to compelling levels. But the FII selling is not letting the prices settle down and consolidate... For now, we are slaves to global price action," market expert Ajay Bagga told CNBCTV18.com.
FIIs have already pulled out a net Rs 26,096.7 crore from Indian equities so far in March 2022, which could be a sixth straight month of outflows for Dalal Street, provisional data shows. From October to February, they made net sales of Rs 1.9 lakh crore.
"Despite EM funds seeing inflows, India is seeing FII outflows. A large part of the selling is in financials. Once that selling tapers out, we will see a bottom forming and then an upmove," Bagga said.
Globally, investors are on the back foot amid heightened uncertainty on account of the Russia-Ukraine war and rising crude oil prices. This comes at a time when fears of earlier-than-anticipated hikes in pandemic-era interest rates have hurt market sentiment.
As of Monday, Indian equity benchmarks are about 15 percent below their all-time highs, clocked in October 2021. Before that, both Sensex and Nifty50 had scaled a series of unprecedented levels in a liquidity-driven run.
IDBI Capital Markets Head of Research AK Prabhakar suggests long-term investors can accumulate HDFC group stocks, which in his view are trading at "very attractive" levels. "The HDFC group is highly held by foreign portfolio investors (FPIs) and foreign institutional investors (FIIs)... Their selling in FY22 is one of the highest in the last 20 years," he told CNBCTV18.com.
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The Nifty50 benchmark is up 5.2 percent in the last year.
HDFC Bank remains attractive from a fundamental perspective, according to Jyoti Roy, DVP-Equity Strategist at Angel One.
"The recent correction in HDFC Bank is due to the overall negative market sentiment due to the Russia-Ukraine war, which has caused a global risk-off environment," he told CNBCTV18.com.
According to Roy, the lender posted a decent set of numbers for the third quarter of FY22 on the back of strong loan growth, and the third wave of the pandemic is unlikely to affect its asset quality. "HDFC Bank remains one of our top picks in the banking space given reasonable valuations at 2.6x FY23 adjusted book, which is at a discount to historical averages," he said.
"HDFC Bank, HDFC and HDFC Life are trading at valuations below levels seen during the 2020 pandemic panic as well as the 2008 financial crisis," added IDBI Capital's Prabhakar.
Hemen Kapadia of KRChoksey Securities is not enthused about HDFC Bank at the current juncture.
The stock appears to be in a short-, medium- as well as long-term downtrend, having made a top lower bottom formation on the monthly chart, he told CNBCTV18.com.
"The outlook continues to be negative though, in the extreme near term, an oversold situation could lead to a small bounce. But this anticipated bounce is going to be a recovery and not a rally," Kapadia said.