HDFC Bank becomes first Indian bank to cross Rs5 trillion market cap

Mumbai: India’s most-valued lender HDFC Bank Ltd on Thursday crossed Rs5 trillion market capitalisation for the first time, making it only the third Indian company to achieve this milestone.

In intraday trade, the stock touched a fresh record high of Rs1,53.75 on the BSE, up 3.31% from its previous close. The scrip closed at Rs1,931.80, up 2.15% with a market cap of Rs5 trillion. The Sensex index closed higher by 0.51% to 35,260.29 points.

Tata Consultancy Services Ltd (TCS) and Reliance Industries Ltd (RIL) are the other two companies which crossed market capitalisation of Rs5 trillion. RIL remained the most-valued company with a market cap of Rs5.82 trillion, followed by TCS with a market cap of Rs5.57 trillion.

HDFC Bank’s steady 20% profit growth quarter-after-quarter as well as its immunity to the bad loans crises has helped the stock.

The bank also reports bad loan ratio below 1%, the lowest among Indian lenders. Thus, investors continued to buy the stocks despite high valuation of close to 4.8 times its expected book value for this fiscal.

The recent gains in the stock along with other banking shares was due to news report on government mulling 100% foreign direct investment in the banking sector.

Brokerage firm Jefferies India expects that the this is sentiment positive, but the magnitude of impact should be marginal as the gap between current foreign institutional investor (FII) shareholding and upper limit is wide for most banks barring HDFC Bank.

In the last 12 months, the stock has gained 42.34%, while the S&P Bankex, the broader gauge of banking stocks, advanced 36.62%.

The bank will report its December quarter earnings on 19 January. According to 16 Bloomberg analysts’ estimates, the bank may report a net profit of Rs4,652.90 crore.

“HDFC Bank’s earnings growth should get a boost from recovering loan demand as disruption from the 2017 implementation of India’s goods and services tax wanes,” said a 16 January Bloomberg Intelligence report.

“Strong exposure to retail should promote loan growth. Margin may struggle to expand further, but should stay above 4%. Credit costs could rise from last year’s low base, but will still stay under control, as HDFC Bank has lower exposure to stressed borrowers than other corporate lenders. Investors may closely monitor digital banking initiatives,” the report added.

Among the analysts covering the HDFC Bank stock, 50 have a “buy” rating, three have a “hold” rating, while two has a “sell” rating, according to Bloomberg data.