Buy or sell: Is it wise to accumulate SBI, HDFC Bank shares in FY25? — explained


Buy or sell stocks: Despite a strong rally in PSU bank stocks, shares of State Bank of India (SBI) remained a laggard. However, the SBI share price has delivered strong upside movement in the last two months. SBI share price has risen from around 605 to 753 apiece level, logging around 25 percent rise in this time. However, Nifty 50 and Nifty Bank major HDFC Bank shares continue to trade sideways to negative at this time. HDFC Bank share price has come close to the historical low of its PE multiple as well. Interestingly, the Nifty Bank index has risen nearly 5 percent in the last two months. So, an investor looking for a value pick available at a discounted price might find it hard to decide whether they should look at SBI and HDFC Bank shares or not.

Should you accumulate SBI or HDFC Bank shares?

Speaking on the outlook of SBI and HDFC Bank shares, Amit Goel, Co-Founder and Chief Global Strategist at Pace 360 said, “SBI share price has demonstrated strong performance in recent times and is presently trading less than 8 percent below its all-time high made earlier this month. Conversely, HDFC Bank share price, which reached a peak of approximately 1757 in July last year has experienced a significant downturn following q3 results and is trading just 5 percent higher than its 52-week low made in February this year. Furthermore, in terms of the PE ratio, the SBI share price currently trades at a trailing PE of 10, while HDFC Bank trades at a PE of 18.60. Notably, HDFC Bank’s PE ratio is close to its historically low levels, which was at 16.15 made in March 2020.”

SBI share price outlook

On fundamental outlook of SBI shares, Shreyansh V Shah, Research Analyst at StoxBox said, “Though in the December quarter, SBI reported a 35% percent fall in its standalone net profit at Rs. 9,164 crores, weighed down by higher operating expenses, as compared to Rs. 14,205 crores in the year-ago period mainly on account of one-time exceptional item of Rs. 7,100 crores. However, the net interest margin of the lender remained stable at 3.22%. We believe that the bank’s liability franchise remains impressive and we see lower stress on deposit mobilization compared to private banks. With the bank’s consistency in maintaining healthy asset quality, lower credit costs sequentially, and impressive liability franchise alongside no stress on deposit mobilization, our outlook remains positive for the bank.”

HDFC Bank share price outlook

“Amidst the concerns over the bank’s LDR HDFC Bank aims to continue to improve the loan-deposit ratio (as loan growth would be lower than deposit growth) and the focus is on incremental Loan-Deposit ratio. In addition, with the bank’s focus on branch expansion in semi-urban and rural areas, we feel the bank is poised to perform better in the forthcoming quarters. Also, due to the bank’s vast branch network, its subsidiaries can access large cross-selling opportunities, thus indirectly supporting the topline growth. In the last five years, earnings have grown at 17% CAGR while market cap growth is only 9% which implies a significant opportunity for the HDFC Bank to grow in the long term,” said Shreyansh V Shah of StoxBox.

The StoxBox expert said that a long-term investor can accumulate both SBI and HDFC Bank shares.

SBI Vs HDFC Bank: Which stock to buy?

On the suggestion to stock market investors who want to accumulate either of these two stocks in FY25, Amit Goel of Pace 360 said, “Our perspective favors accumulating HDFC Bank over SBI. Nevertheless, given the prevalent overvaluations in the broader market, it would be prudent to wait for a substantial market correction before starting to buy the stock.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 29 Mar 2024, 08:23 AM IST


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