HDFC Bank(BSE Code 500180)

The share price of HDFC Bank has charted a downward course and has reached near Rs 1,350. According to the equity research wing of a leading brokerage house, this is an account of the unloading by mutual funds to maintain the SEBI-dictated ratio of maximum 10 per cent stake in any one company, the share price may go down further in the coming days if the momentum of the selling spree continues for some time. However, genuine long-term investors should not worry by this trend as the share price will subsequently rebound and move up to near the Rs 2,000-mark in the current year.

According to the research outfit, prospects for the bank after the merger of HDFC with it will improve substantially. The setback to retail earnings on account of the Covid-19 pandemic during the last two years or so will be a thing of the past. The positive effect on NIM that could emanate from faster retail credit offtake going ahead may take 4 to 6 quarters to materialise and as rates rise, the CASA share is expected to moderate. Thereafter, things will be much better. Significantly, CRB (commercial and rural banking) saw higher lending growth even during Q2FY22 when it recorded a spurt of 30.4 per cent. Going ahead, it will grow at a faster pace.

Asset quality is also robust. During Q2FY22, the bank reported a lower slippage ratio of 1.6 per cent, which improved further to 1.3 per cent in the last quarter.

The merger of HDFC will give a further boost to the company’s topline as well as bottomline going ahead.

(CMP Rs 1355.00, 52 week H/L Rs 1275/1292, BV Rs 1097.00, FV Re 01)

Reliance Industries(BSE Code 500325)

At a time when the stock market has charted a downward trend, with leading indices seeking lower and lower levels, on FII and other selling, Reliance Industries is moving in the totally opposite direction, seeking higher and higher levels. During the last one year, the stock price of Reliance has zoomed by almost Rs 1,000 – from around Rs 1,800 to around Rs 2,800.

Observers are very much surprised at RIL charting a different course. But sources close to the management are extremely bullish and expect the share price to remain distinctly buoyant and move up beyond Rs 3,000. According to these sources, the factors responsible for the buoyancy in the RIL stock price are so strong that the stock price will remain distinctly firm in the days to come.

According to these sources, RIL is heading for a division of businesses. On one side, the Jio telecom division will be carved into a separate company, and on the other, retail will also emerge as an independent company, RIL itself retaining all other businesses. As shareholders of RIL will be entitled to get shares of all the three companies, they will be Richie Rich after the split as it had happened when the RIL empire was divided between the two brothers – Mukesh and Anil

As if this is not enough, the other good news is that RIL is planning to further diversify its activities by acquiring a British pharmacy chain at a cost of around $ 10 billion.

(CMP Rs 2758.00, 52 week H/L Rs 2800/1877, BV Rs 1097.00, FV Rs 10)

Infotech stocks

Though the stock market is extremely volatile, rising one day and falling the next two days, there has been a sustained fall in prices of Information Technology (IT) stocks. Led by Infosys, which had charted a distinctly upward course of late, almost all leading IT shares are seeking lower levels on an avalance of selling touched off by a few disturbing developments. First of all, North America, which contributes almost 65 to 70 per cent of the Indian IT sector's revenues, has entered a depression on account of the Russia-Ukraine war, President Biden's neglect of the economy and fears of a costly credit era ahead with the US Federal Reserve set to hike interest rates. As the business environment in other parts of the world - particularly in Europe and South Asia - is not conducive, the Indian IT industry is not in a position to immediately divert its business to other areas. Needless to say, it is feared that there will be a marked fall in external revenues for the Indian IT sector this year

Another problem being faced by the IT industry is rising attrition. Of course, all companies have been appointing freshers but the sudden departure of experienced employees leads to certain problems like slowdown and rising costs. This in turn leads to rise in employee costs, which in turn adversely affect margins. The performance of many companies during Q4 FY2022 will reflect this adverse impact on profitability.