Healthy growth in the individual segment combined with lesser credit costs strengthen performance.

HDFC Ltd posted a consolidated Net Profit of Rs 5309 crore which is a 5.3 per cent growth in comparison with the same quarter in the last financial year. The asset quality has improved but the profits were lowered due to decline in margins, low gain on investments and high expenses.

Placing the margin fall aside, the overall performance was excellent. The company got the highest percentage growth in individual loan book in 8 years.

HDFC’s outstanding loan book has grown by 16 per cent YoY. This growth was mainly driven by individual loans which constituted about 77 per cent of the total loan book until June.

Margins have fallen but they will be recovered by the next quarter.

RBI has increased the limit of external commercial borrowings (ECB) under the automatic route to $ 1.5 billion per financial year. HDFC plans to raise an amount of $1.1 billion.

After the merger with HDFC Bank, the access to lower cost of borrowings of the bank might increase the spreads on the home loan portfolio of the combined entity and aid in faster growth.

HDFC’s core lending business is valued at 1.7 times FY24 estimated book value, which is a significant lead compared to its peers but at a discount to its historical average valuation. HDFC’s ability to deliver consistent performance across credit cycles in spite of its large size and high competition justifies premium valuations.

Let us take a look at the Weekly candlestick chart of HDFC Ltd:

The stock has completed its retracement cycle by hitting the 61.8% retracement level twice. The price took support at this level multiple times and the price seems to be recovering. We might see the stock reach its swing high of Rs 3021 soon considering the bright outlook.

HDFC Ltd is definitely very bullish. HDFC Ltd belongs to the top 10 heavy weighted stocks of the NIFTY50 and the news about the merger will definitely be a boon for investors.