HDFC Bank has largely ticked all the right boxes in Q4, delivering better-than-expected deposit growth, positively surprising on margins, and seeing a rebound in its liquidity coverage ratio.
Year-to-date, Nifty 50 has surged by 4.70%, with 20 or 40% of its constituents delivering double-digit returns thus far. Leading the gains is BPCL, with an impressive increase of 34.20%, followed by ONGC, Bajaj Auto, Adani Ports and SEZ, and Tata Motors, all boasting returns of over 30%.
In the last four trading sessions, two private sector banks have seen significant development both related to their shareholding. First is the case where the news came out that FII’s have reduced their holding and in another case a private equity investor sold its stake through a block deal. After both announcements, the stock prices moved up sharply. A number of times in stocks, where there is big institutional holding, there are phases, where it is more of technical reason which keeps the performance down. Now, surprisingly, it is during this period that PSU banks stocks which have been doing extremely well for the last couple of quarters, witnessed some profit booking. In case there are a few more trading sessions where banks see a divergence in performance, one cannot rule that a narrative might come on the street, about how private sector banks are better than PSU banks. It would be better to ignore those noises.
Q4 earnings preview indicates private banks may outperform public sector lenders due to tight liquidity. JM Financial expects 5% earnings growth, while analysts focus on NII growth, asset quality improvement, and stock outlook based on deposit performance.