HDFC and HFC Bank shares -- commonly referred to as the HDFC twins -- continued to decline for a third straight day on Thursday, giving up a majority of their biggest intraday gain in 13 years on Monday.
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Housing Development Finance Corporation (HDFC) and HDFC Bank shares continued to decline for the third session in a row on Thursday, giving up nearly all of their gains on Monday after the financial services majors announced a merger between them.
HDFC shares fell by as much as Rs 70.5 or 2.8 percent to Rs 2,515 on BSE on Thursday. The HDFC Bank stock dropped by Rs 33.8 or 2.2 percent to Rs 1,517.1.
HDFC Bank shares have declined 4.8 percent so far in 2022 and HDFC declined 1.9 percent, as against the Nifty50's return of 2.6 percent and the Nifty Bank's 6.1 percent.
On Monday, the announcement of the merger had triggered a jump of almost 10 percent in the stocks -- their biggest intraday gains in 13 years.
The proposed HDFC-HDFC Bank amalgamation, subject to shareholder and regulatory approvals, is set to create one of the largest lenders in the world. Currently, HDFC holds a stake of around 21 percent in HDFC Bank.
Under the merger, shareholders will get 42 HDFC Bank shares for every 25 shares in HDFC.
Many analysts view the proposed merger between HDFC Bank and HDFC Bank positively.
According to Morgan Stanley, the merger benefits both HDFC and HDFC Bank, and will be earnings per share-accretive in the first full year.
Market expert Mehraboon J Irani finds HDFC to be a better bet between the two at the current juncture.
"You have to accept the fact that it should be at least 3-4 quarters before this particular marriage comes together. As normally happens when this announcement happened, the market was gung ho. Everybody wanted to buy the stocks and now people are realising that quite a few spanners are going to be thrown, whether the insurance vertical should be part of a complete bank," he told CNBC-TV18.
Given the two companies' price-to-book value ratios in the past 3-4 years, there's nothing wrong in holding on to HDFC Bank and HDFC shares, he said.
The synergy between the two companies is going to be a positive in his view.
Deven Choksey of KRChoksey told CNBC-TV18 he believes the fundamental picture of both companies remains extremely convincing.
He likes the merger for the increase in the size of mortgage assets on the books and a steady flow of income and is of the view it will help both expand their customer reach.
First Published: IST