HDFC bank posts the biggest single-day fall in nearly 3 years; Erases market cap of nearly Rs 1 lakh crore

Today’s dip of -8.44% in HDFC Bank shares, despite decent Q3FY2024 results, has left investors questioning the reasons behind this downturn. In this article, we dissect the factors contributing to the decline, assess the bank’s Q3 financials, and draw insights from historical instances of drastic falls in HDFC Bank shares.

Understanding the Fall
Although HDFC Bank reported a robust Q3 profit, concerns raised by analysts led to a significant drop in share value. Brokerages downgraded the stock, citing worries over liquidity coverage ratio (LCR), deposit and loan growth, and a margin that remained flat. Analysts expressed apprehensions about the sustainability of operating profit growth drivers, prompting a reevaluation of earnings projections.

Q3FY2024 Financial Snapshot
Examining HDFC Bank’s Q3FY2024 financials, certain key metrics stand out:

• Gross NPA reduced from 1.34% to 1.26% (QoQ)
• Net NPA decreased from 0.35% to 0.31% (QoQ)
• Provisions increased from Rs 2,904 crore to Rs 4,217 crore (QoQ)

Historical Analysis: Learning from the Past 

On March 23, 2020, amidst the onset of the newly emerged COVID-19 pandemic and heightened lockdown concerns, HDFC Bank shares closed at Rs 750.79, reflecting a -12.61% decline from the previous day’s closing value of Rs 859.09 on March 20, 2020. Remarkably, despite the uncertainty surrounding the situation, the shares swiftly rebounded, recovering these losses within a mere 3 days.

Similarly, in February 2022, HDFC Bank shares were valued at Rs 1466.83 on the 23rd, just before experiencing a substantial 5.43% fall the following day. This drop in share price, triggered by a Securities Appellate Tribunal’s Sebi order imposing a fine of Rs 1 crore on HDFC Bank, resulted in the share price declining to Rs 1387.18. Interestingly, HDFC Bank shares demonstrated resilience, bouncing back from this setback in a relatively short span of 36 days post the imposition of the penalty.

Conclusion: Navigating Market Volatility
In conclusion, investors in HDFC Bank should exercise patience and thoughtful consideration. While recent falls may raise concerns, the bank’s robust fundamentals and historical resilience suggest that such downturns may present opportunities rather than threats. Deciding whether to capitalize on this situation or reevaluate holdings requires careful consideration of individual investment strategies and risk tolerance. By understanding the intricacies of the current scenario and drawing insights from the past, investors can make informed decisions amid market fluctuations.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.