HDFC, HDFC Bank shares slump — Here's what's causing selling pressure in the twins

HDFC share price NSE, HDFC Bank share price NSE: Housing Development Finance Corp (HDFC) and HDFC Bank shares suffered steep losses on Friday, a day after the mortgage lender reported a strong set of financial results for the January-March period. 

HDFC shares opened five per cent lower at the day's lowest level at Rs 2,720, having closed at Rs 2,862.35 the previous day. HDFC Bank shares slid to as low as Rs 1,631 after starting the day at Rs 1,637, a steep decline from their previous close of Rs 1,727.2.

Most brokerages have a 'buy' rating on HDFC, with CLSA having set a target price of Rs 3,050.

According to Macquarie, which has an 'outperform' rating on HDFC with a target price of Rs 3,060, the focus remains on the HDFC-HDFC Bank merger, whose likely date is around July 2023.

HDFC Q4 results

After market hours on Thursday, HDFC reported a standalone net profit of Rs 4,425 crore for the quarter ended March 31, 2023, marking an increase of 19.6 per cent compared with the corresponding period a year ago. Its net interest income grew 15.6 per cent to Rs 5,321 crore, and net interest margin improved by 20 basis points to 3.6 per cent. 

What's causing selling pressure in HDFC, HDFC Bank shares?

The meltdown in HDFC twins came about after MSCI updated that it will adjust the index weightage factor to 0.5 from the earlier expected 1.0 in the upcoming merger. MSCI's move could result in outflow to the tune of Rs 1,200 crore in HDFC Bank against market expectations of buying to the tune of $300 crore (if the index adjustment factor was calculated at 1.0).

HDFC's weightage in the MSCI India index will come to 6.5 percent than the previously expected 6.74 per cent. In the MSCI Emerging Markets index, the weightage will come to 0.90 per cent than previously calculated 0.93 per cent.

EDITOR'S TAKE | Anil Singhvi highlights that HDFC twins usually fall to such extent when market hits lower circuit 

Zee Business Managing Editor Anil Singhvi pointed out that historically, the HDFC twins have only fallen more than five per cent on days the overall market hit the lower circuit. "For instance, in 2008," the market wizard said. 

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