News

Published: January 30, 2024
Updated: January 30, 2024

RBI Approval Boosts HDFC Bank Shares, shares up by almost 2%

Shares of HDFC Bank surged by almost 2% to ₹1,462.80 in the early trade on Monday, following the Reserve Bank of India's (RBI) approval for LIC to increase its stake in the bank up to 9.99%.

LIC's Expanded Stake: A Positive Move

In a recent exchange filing, HDFC Bank announced that LIC had received permission from the RBI to enhance its stake to 9.99%. The move is expected to boost investor confidence in the country's largest private sector bank.

Current Stake and Future Possibilities

As of the end of Q3FY24, LIC held a 5.19% stake in HDFC Bank, valued at ₹48,836 crore. With the approval, LIC can now acquire an additional 4.8% stake. The RBI has advised LIC to complete the acquisition by January 24, 2025.

Market Response and Expert Opinions

Between January 16 and January 25, HDFC Bank's stock experienced a notable decline of around 14.5%. However, market experts anticipate a rebound with LIC's increased stake. Experts view LIC's involvement as a positive sentiment booster, indicating a potential turnaround for the stock.

Analyst Insights and Investor Expectations

An analyst pointed out that the permission granted to LIC is valid for one year, suggesting that immediate expectations of a substantial purchase are unlikely. Nonetheless, investors are hopeful that LIC's increased involvement will positively impact HDFC Bank's market performance.

Challenges Faced by HDFC Bank

HDFC Bank faced challenges, particularly after the release of Q3 FY24 results, where it fell short of street estimates in deposit and liquidity metrics. The decline in net interest margin (NIM) and increased cost of funds affected the bank's overall performance.

Outlook and Market Influence

Despite recent challenges, experts believe that HDFC Bank, with LIC's extended support, could witness a turnaround. The substantial impact of HDFC Bank on both the Nifty 50 and Nifty Bank emphasizes the potential ripple effect on the broader market.

Positive Signs for HDFC Bank

While the recent decline raised concerns, the RBI's approval for LIC's increased stake has injected optimism into HDFC Bank's future. Investors are now closely watching for the developments over the coming months, anticipating a positive trajectory for the bank's stock.