Bears Flock to HDFC Bank Counter as Loan and Deposit Growth Slows

In a recent development, bears have been actively trading on the derivatives counter of HDFC Bank, following the lender’s slower loan growth and flat deposit growth in the June quarter. The bank’s stock price slumped 4.57% to ₹1,648.10 on Friday, largely due to its quarterly business update. This decline in stock price was accompanied by a significant rise in open interest (OI) of 9.43%, indicating a bearish sentiment among traders.

The OI, which represents outstanding positions, rose sharply on Friday, with 8020 contracts being added alone. This rise in OI was accompanied by a fall in stock price, indicating that traders are expecting the stock to decline further. The heavy selling of at-the-money (ATM) call options expiring on 25 July also suggests that traders do not expect the stock to rise from its current market price. This implies that the option seller does not expect the stock to appreciate and is willing to sell the option at a lower price, pocketing part of the premium paid by the option buyer.

The stock had previously hit a 52-week high of ₹1,794 on 3 July, following reports that it could see $3-4 billion of incremental flows from passive trackers of the MSCI Emerging Markets Index. However, the stock has since fallen 8% to its current level, due to a marginal slowdown in loan growth and the report of the part sale of loan portfolio.

Ambareesh Baliga, an independent market analyst, expects the stock to correct by another ₹50-100, implying a potential 3-6% fall further from its current level. He believes that the stock will not experience a big correction, as analysts may revise their earnings estimates for Q1FY25 post the business update. However, if the actual earnings for Q1 end below the revised estimates, the stock could re-test its 52-week low of ₹1,363.55.

S.K. Joshi, Executive Director at Khambatta Securities, believes that the pain of the merger of HDFC into the lender could last for a few more years, but does not expect a big correction despite the huge bearish bets being raised on the counter.

The active options expiring on 25 July show that the 1600 level is strong support and 1700 is stiff resistance for now. Sources suggest that HDFC Bank has been facing challenges in attracting depositors since the merger of HDFC in July last year, as the erstwhile housing finance company could offer more competitive rates to term depositors. With the merger having taken effect, this advantage is absent, and the bank is now grappling with deposit growth lagging credit growth.

Mutual funds have increased their stake in the bank to 24.83% in the June quarter, while foreign institutional investors (FIIs) have marginally reduced their stake to 47.17%. Retail investors have also reduced their stake to 11.78%. The bank’s weight on Nifty is 11.95%, followed by Reliance Industries (9.98%) and ICICI Bank (7.95%). A sharp move on the counter could impact the Nifty, too.

In conclusion, the bears have been actively trading on the derivatives counter of HDFC Bank, indicating a bearish sentiment among traders. The stock price has declined, and the OI has risen sharply, suggesting that traders expect the stock to decline further. The stock may correct by another ₹50-100, but a big correction is unlikely. The bank’s weight on Nifty makes it an important stock to watch, and any significant move on the counter could impact the broader market.

Historical Context:

HDFC Bank is one of the largest private sector banks in India, with a history dating back to 1994. The bank has undergone significant changes in recent years, including the merger with HDFC, a leading housing finance company, in July 2022. The merger aimed to create a more comprehensive financial services platform, but it has also led to challenges in attracting depositors and managing deposit growth.

In the June quarter, HDFC Bank reported slower loan growth and flat deposit growth, which has led to a decline in its stock price. The bank’s stock has been under pressure due to concerns about its ability to maintain its growth momentum and manage its deposit growth.

News:

Bears Flock to HDFC Bank Counter as Loan and Deposit Growth Slows

• HDFC Bank’s stock price slumped 4.57% to ₹1,648.10 on Friday, largely due to its quarterly business update.
• The bank’s loan growth slowed down, and deposit growth was flat in the June quarter.
• Bears have been actively trading on the derivatives counter, with a rise in open interest (OI) of 9.43%.
• The OI represents outstanding positions, and the rise suggests that traders expect the stock to decline further.
• The heavy selling of at-the-money (ATM) call options expiring on 25 July indicates that traders do not expect the stock to rise from its current market price.
• The stock had previously hit a 52-week high of ₹1,794 on 3 July, but has since fallen 8% to its current level.
• Analysts expect the stock to correct by another ₹50-100, implying a potential 3-6% fall further from its current level.
• The bank’s weight on Nifty is 11.95%, making it an important stock to watch, and any significant move on the counter could impact the broader market.

Summary in Bullet Points:

• HDFC Bank’s stock price declined 4.57% to ₹1,648.10 on Friday due to slower loan growth and flat deposit growth in the June quarter. • Bears have been actively trading on the derivatives counter, with a rise in open interest (OI) of 9.43%. • The OI represents outstanding positions, and the rise suggests that traders expect the stock to decline further. • The heavy selling of at-the-money (ATM) call options expiring on 25 July indicates that traders do not expect the stock to rise from its current market price. • Analysts expect the stock to correct by another ₹50-100, implying a potential 3-6% fall further from its current level. • The bank’s weight on Nifty is 11.95%, making it an important stock to watch, and any significant move on the counter could impact the broader market. • The bank’s merger with HDFC has led to challenges in attracting depositors and managing deposit growth.