The fluctuations that were going on in the stock market for the last few months had turned the portfolios of many investors into red. Especially the heavy selling in March had increased the tension of the people. But now the month of April has brought some relief and hope on Dalal Street. In this latest recovery, the shares of big players of the banking sector, especially State Bank of India (SBI) and HDFC Bank have made a tremendous comeback. Now the prices are looking a little more attractive than before, so a big question is arising in the minds of common investors, after all, in which bank’s shares should they invest their hard-earned money?
HDFC Bank or SBI.. Who are the big brokerage houses betting on?
Sensing the market movements, well-known brokerage firm Motilal Oswal Financial Services has recently made an important change in its model portfolio. He has reduced his investment in HDFC Bank, while increased his stake in SBI by 100 basis points. Talking about the figures, a huge decline of more than 18 percent was recorded in the shares of SBI in the month of March. Being a government bank, it had to face the brunt of the market the most.
At the same time, shares of private sector giant HDFC Bank also fell by more than 17 percent. However, both the banks have made a good comeback in April. At present the market cap of HDFC Bank is around Rs 13 lakh crore and in the last just one week it has jumped by more than 10 percent. Its P/E ratio is at 15.59. On the other hand, SBI has a market cap of around Rs 10 lakh crore, which has gained 5 percent in the last one week and its P/E ratio is 11.20.
What is going on in HDFC Bank?
The reason for the huge fall in the shares of HDFC Bank was not only due to the bad mood of the market. The sudden resignation of former part-time chairman of the bank Atanu Chakraborty had increased the concerns of investors. He left the post saying that some of the bank’s practices were against his personal values and ethics. This news spread negativity in the market.
However, the Reserve Bank of India (RBI) has given great relief to the investors by clarifying the situation. During the announcement of the Monetary Policy Committee (MPC) decisions, RBI Governor Sanjay Malhotra made it clear that no lapses have been found in the functioning or corporate governance of HDFC Bank. After this clarification, investors’ confidence returned and a sharp recovery was seen in the stock.
Which bank’s shares will become the horse of the long race?
According to Vinod Nair, head of research, Geojit Investments, the fundamentals of both the banks are very strong. Better asset quality and provisioning support them. However, he believes that SBI’s current valuation is above its historical average, limiting the scope for huge profits in the near future. In contrast, HDFC Bank looks more attractive from risk and profit perspective. The post-merger benefits and the green signal from RBI may strengthen its margins in future.
Harshal Dasani, Business Head, INVasset PMS, also believes that the investment logic of both the banks is completely different. According to him, the structural form of HDFC Bank is in a much stronger position. There is good growth in deposits and credit, making it a stable stock with consistent profits in the long run. In contrast, SBI shares are more cyclical. Due to strong credit growth and low valuations, it can deliver fast profits in a short period of time, but this stock remains more sensitive to macroeconomic conditions like interest rates.
What should an investor do?
If you want a stable investment for long term while keeping your money safe, then HDFC Bank can be a better option for you. But if you want to earn fast profits by taking little risk, then SBI is suitable for your portfolio. According to experts, the most sensible step in the current situation would be to make a balanced investment in these two stocks, so that the benefits of both stability and fast growth can be availed.
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