A Value Pick

While there could be near-term challenges, the RBI’s recent measures and the bank’s strong financials offer comfort

- Radhika Merwin

It has been a hellish past month for the Indian stock market.

Investor wealth has eroded sharply, with many large-cap stocks also falling like ninepins and recording multi-year lows.

In this market mayhem, banking and finance stocks have been the worst hit, with marquee names also coming under intense selling pressure.

HDFC Bank, one of the most resilient stocks backed by sound financial performance in recent years (amid multiple challenges in the banking sector), was among the bluechip stocks that took it on the chin over the past month.

At its lowest point, the stock lost 35 per cent in March alone; though the recent rebound in the market has helped recoup some of the losses.

However, the stock is still down 23 per cent since the beginning of March.

Valuations have also corrected sharply from 4.5 times price to-book a year ago to 2.5 times currently.

Is it a good time to stock up HDFC Bank?

Near-term challenges

There are several points that investors need to keep in mind while considering banking and finance stocks now. One, with the Covid-19 threat increasing and impacting growth of businesses in India, the banking sector is likely to witness a sharp slowdown in growth and earnings in the coming quarters.

Two, banks with relatively higher exposure to unsecured consumer loans and SME loans may be more impacted by the ongoing turmoil.