- FPI in #HDFCBank to continue
Here's what Sajeet Manghat and Alex Mathew are focusing on in today's 'The Editors' Cut'.
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Here's what Sajeet Manghat and Alex Mathew are focusing on in today's 'The Editors' Cut'.
--------------------------------------------------------------------------------------------------------------------
For more videos subscribe to our channel: https://www.youtube.com/@NDTVProfitIndia
Visit NDTV Profit for more news: https://www.ndtvprofit.com/
Don't enter the stock market unaware. Read all Research Reports here: https://www.ndtvprofit.com/research-reports
Follow NDTV Profit here
Twitter: https://twitter.com/NDTVProfitIndia , https://twitter.com/NDTVProfit
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TVTranscript
00:00 Over the couple of days that we've seen sharp cuts for the markets,
00:04 you've seen HDFC Bank drop about 10% or thereabouts, a little more than that.
00:08 What are the factors? Of course, we've discussed that in detail.
00:11 The question is not, is whether or not we see a little bit of respite from that selling.
00:17 If the ADR is anything to go by, Sajid, and I understand there's a very small amount that it represents,
00:22 but if the ADR is anything to go by, that respite seems to be coming in today.
00:27 Can that conclusion be drawn?
00:30 Yes and no. The reason being, ADRs just account for 13.5% of HDFC's equity.
00:37 The liquidity is slightly lower there.
00:40 And what we saw yesterday was that ADR closing at 1.5% higher there.
00:48 So yes, the gruesome selling which was coming in HDFC Bank ADR has come down.
00:58 But is it selling over? The answer is no.
01:02 Because HDFC Bank continues to be in the model portfolios of most of the FIS.
01:08 As part of the MSCI holdings as well, HDFC Bank is there in most of the portfolios of global companies
01:16 because Indian financials, it was a proxy for Indian financials in that way.
01:21 So there was HDFC in that.
01:23 So there is going to be selling.
01:26 I would say it's not selling, but it will be a churn where it may move from one hand to another hand.
01:33 And that volume will be reflected for the next couple of days till that stabilizes.
01:38 Remember, the price of HDFC in the local market is almost at October levels,
01:43 October 26th level when we saw the index falling because of the US yield hitting 95%.
01:47 And at that time as well, you saw HDFC which led the decline,
01:51 it contributed to most of the decline for the benchmark.
01:53 So, where does the first selling come in?
01:57 The most liquid stocks can be sold, right?
02:00 So, and HDFC has a good liquidity.
02:02 If you look at the liquidity parameter, it's almost 100% because it doesn't have a promoter.
02:08 So, the liquidity comes from the most,
02:10 and in this case, the most liquid stock is under pressure.
02:13 So, you're going to see that kind of selling.
02:14 I think that's important to also point out before you go to the next point,
02:17 because that will lead the context, I think, is the holding, right?
02:20 So, Samina was speaking about in trade setup,
02:23 but I think it's important to elucidate that further or to repeat that.
02:27 Half of the holding is FIIs.
02:29 So, you have to break up the FIIs into multiple buckets, right?
02:34 There are exchange traded funds who are following a Nifty or a Sensex strategy.
02:39 So, they have to keep HDFC.
02:41 They cannot sell, you know.
02:43 So, that's around 12% of the foreign funds which you're talking about.
02:47 Then you have domestic funds which have around 10, 9 to 10, 11%.
02:51 Most of the funds have financial as 30% holdings.
02:55 And within that, you have HDFC where it would be around 8 to 10%.
02:59 They don't go around about 10%.
03:00 They can't.
03:01 They can't.
03:02 So, the room for domestic FIIs to absorb that liquidity from FIIs is limited.
03:08 Is limited.
03:09 Yeah.
03:09 Okay.
03:09 So, that is one thing to watch out for.
03:13 So, where does the buying come from?
03:15 It would be from other FIIs who would like to get an exposure to a bank like HDFC Bank.
03:20 Now, everyone knows that it's going to be three to four quarters of pain because there is a,
03:24 you know, credit growth versus deposit growth versus argument which is going on.
03:29 And it's going to play out across the frontline banks, including ICICI Bank,
03:34 Axis Bank, Kotak, everyone.
03:36 So, if you have enough liquidity or cash equity in your books,
03:39 it's good because then you are able to manage that for the next three to four quarters.
03:44 But coming back to an HDFC Bank, there is going to be that pressure.
03:49 And you're getting it at 10% cheaper.
03:51 So, you may, if you were underweight financials or HDFC, you may increase it a little bit.
03:59 But that's not going to happen because there is going to be a constant pressure because it's 50%
04:06 more than half of its equity is held by foreign investors.
04:09 Yeah.
04:09 So, while even if you remove the exchange traded funds, there is an active investor base,
04:16 which is going to churn and bring down the portfolio allocation to HDFC Bank.
04:21 And there will be some who will be adding.
04:22 So, if you look at the delivery statistics yesterday,
04:25 it's even more than what we saw on the first day when the first fall happened.
04:29 Yesterday, we saw the cut of two, two and a half, 3% in HDFC.
04:33 The day before it was 8, 8 and a half percent.
04:36 Delivery yesterday was 69% on NSE.
04:39 Total number of amount of value of delivery was 8,300 crores.
04:44 Yeah.
04:44 You know, it's the stock is at October 26 low.
04:48 And what we saw was that many of the FIs selling which may, which have come in,
04:53 which I'll come to in subsequently, the FIs selling which we are seeing,
04:57 was observed, you know, picked up by other FIs.
05:02 So, domestic ability to observe HDFC Bank is limited today as we speak.
05:08 Today, unless you're going to take a broad, you know,
05:11 bet saying that, you know, this is the time I'm going to hold for next four years.
05:15 Because HDFC had said in the past that they wanted double their book every four years.
05:20 Sure.
05:20 So, what was the point that you were making?
05:22 So, you made the point on FIs, but my point here is mitigation of selling.
05:26 And I think this is ultimately the crux of this conversation,
05:30 at least for the short term, could we see a little bit of dust settling?
05:33 The reason being that over the course of these two days,
05:36 you would have seen even those that have been overweight on HDFC Bank,
05:40 see that 10% or 9 to 10% number shrink a little bit in terms of that overall portfolio,
05:46 which allows them the ability, if at all, to nibble in, if they find that there is an attractive.
05:51 They were convinced about HDFC Bank two days back or three days back.
05:56 Would that have materially changed?
05:57 And from that perspective, there will be more buyers at this price,
06:00 as presumably, than there were two days back.
06:03 So, the question is, is there an alternative to HDFC Bank?
06:06 There are multiple.
06:07 Sure.
06:08 Okay.
06:08 The next question is, you know, should I add HDFC Bank?
06:15 Maybe not.
06:16 That's a fund manager would say that, you know,
06:19 it's already dented my portfolio because I have 10% of HDFC Bank.
06:24 I don't want to add it just because on percentage terms, it has come from 10% to 8%.
06:29 Fair point.
06:29 Simple as that.
06:30 Look at the FPS, which is we're doing.
06:33 That kind of gross selling, which we are seeing the last two days is huge.
06:38 50,000 crores.
06:38 52,000 crores of gross selling by FPS.
06:41 Now, I've seen, I've been looking at last one, one and a half years of numbers of gross sales.
06:46 Once or twice, we have seen that kind of sales,
06:49 but that's because of the block deals which are happening.
06:51 So, you have a buyer and a seller on both sides and so you have that kind of.
06:57 52,000 crores of gross sales in a day is a huge amount.
07:02 But were there significant?
07:03 Over two days, it's a huge amount.
07:05 There were a few block deals, but were there any significant?
07:07 Not much.
07:08 Not much to talk about, right?
07:10 So, the buy side which is coming in because of the block deals which are there,
07:14 but sell is 52,000 and the fact that in the last two days,
07:18 we have seen FPS net selling 20,000 outcomes.
07:21 So, a large chunk of that is HDFC Bank and some of the financials
07:26 because we have seen high delivery happening in ICC Bank, in Axis Bank.
07:32 And the market expects that the same is going to be the issue with
07:37 these two large banks as well going forward.
07:39 So, there is going to be selling.
07:41 Okay.
07:43 Will the stock correct further?
07:45 Marginally, maybe, but it's not going to...
07:48 The churn will continue for some more days.
07:51 You will see these numbers coming in and by the end of this month,
07:56 we'll know that we get that breakout of sector wise how FPS are doing.
08:01 I'm sure the second half of January will have a big negative number coming in for that.
08:08 Interesting.
08:09 All right.
08:10 So, may not be something that you'll have to wait too long to find out
08:14 the outcome of, you'll find out as soon as market starts.
08:18 And I'm sure that we'll be talking about this for some time to come as well.