#AskBQ: HDFC Bank Q2 Earnings Today; Should You Buy?
#ICICIDirect’s Pankaj Pandey and #AxisSecurities’ Rajesh Palviya answer all your stock-related queries. #BQLive
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00:00 Hi, thanks for tuning in. You're watching Ask BQ, a show where all your stock market
00:05 related queries get answered. I'm Smriti Choudhury and with me is Alex Matthew.
00:09 Before we begin, I'd like to remind you that you can send in all your questions through
00:14 the YouTube live chat or through the WhatsApp number that's flashing on your screen. You
00:18 can also send in your questions to any of our social media channels. Now, let me introduce
00:23 you to our guests for today. We have with us Mr. Pankaj Pandey, Head Research, ICICI
00:29 Direct and Radesh Palviya, Senior Vice President, Technical and Derivatives Research at Access
00:33 Securities. Welcome and thank you for taking the time out. Now, before we jump into the
00:38 questions, Alex, what is the BQ focus for today?
00:42 As we like to do, Smriti, on an ongoing basis, we like to start the show with a stock or
00:46 a group of stocks that is in focus. And today we've chosen to take HDFC Bank because it's
00:52 going to be posting its results for the second quarter. And this is going to be the first
00:56 quarter where they have the merged entity that will be reporting the numbers. Of course,
01:02 in the last quarter, you had provisional data that was out. But a lot to talk about, because
01:07 this counter over the last few months, since it started trading as a merged entity, has
01:13 lost over 11.5 percent. Some of that also has to do with question marks about the ROA,
01:21 with question marks about the asset quality, which is expected to deteriorate a little
01:26 bit, and also the net interest margin, which is expected to contract. Some of that has
01:31 already been disclosed by the bank management. So, to talk about this in more detail and
01:36 to understand what you should do as an investor, let's go across to our experts for the day.
01:41 Pankaj, I'll come to you first. What have you made of all of the statements that have
01:47 so far been made by the bank? Is that priced in when we talk about this 11.5 percent decline
01:54 since the merged entity started trading?
01:56 So, hi, good morning, Alex. Thanks for having me. I think, as you see, bank historically
02:03 has been known for delivering very stable set of numbers without much of a volatility.
02:08 Now, when you sort of anticipate near-term volatility, obviously, that also gets reflected
02:14 in the price performance also, which is what we are seeing in terms of a double-digit kind
02:19 of a decline in terms of price performance. Now, our sense is that this volatility is
02:25 going to persist for some period of time on a merged basis. So, while, say, for example,
02:31 credit cost is expected to be about to sort of normalize to 80, 90 bps, which has been
02:37 the sort of historical range. Currently, it's lower than that. And NIMs are also sort of
02:43 expected to sort of decline from 4.1, 4.3 percent kind of a range to a bit lower levels.
02:50 Now, as GFC Bank is undertaking a lot of capex in terms of branch expansion, plus when you
02:55 look at the business updates, while the advances growth quarter and quarter about 5 percent
02:59 is largely on expected lines. I think the deposit growth is still sort of challenging
03:05 when you look at a lot of it is happening through the fixed deposit route, which is
03:10 a slightly higher cost. And I think ROAs are expected to sort of improve to 1.8, 1.9 percent
03:18 in FY25. So, while our previous target has been 2050, we continue to sort of maintain
03:24 by it. But I think near-term underperformance or the price decline, what you're seeing is
03:30 because of the anticipated volatility in the next few quarters in terms of how this margin
03:35 would sort of play out, plus also on the credit costs and along with ROAs. I think people
03:41 are used to seeing very stable set of numbers, consistent numbers from the GFC. And if you're
03:48 not getting that, then obviously it results in price performance.
03:51 Now, another thing is that we also need to look at global macro. So, there's still sort
03:57 of you're still seeing FI selling pressure and continuing. That is largely in the last
04:02 years. And banking is one of the heavyweight sectors which takes the maximum brunt of sell-off
04:07 and which is where I think HTC Bank is sort of underperforming because of these combination
04:14 of factors. And I don't see that changing anytime soon. So, I think business update
04:21 has already come in. So, you really are not going to see big surprises unless something
04:25 there is there in the details.
04:28 Fair point. So, what is an acceptable level for you, Pankaj, then on the NIM and on the
04:34 asset quality? And then the advice from the perspective of the valuations, I think a lot
04:41 of our investors will be holding on to this counter. So, if they are holding, should they
04:45 continue to hold? Should they add on dips? And if they're not holding, is this an opportunity
04:50 to buy from the prospect of expecting that in a couple of quarters, perhaps once things
04:56 stabilize and the path or the runway for growth is there?
04:59 Absolutely. I think these are good levels to sort of buy into our senses that once this
05:05 volatility sort of subsides, I think this will be one of the stocks which should deliver
05:10 a good set of numbers. And I think overall, when we sort of look at banking and financial
05:16 services space, that hasn't sort of done well. And I think there are a lot of triggers for
05:20 this to sort of do well. One, the private sector capex is looking to sort of go up.
05:25 Then I think bond inclusion also will sort of free up a lot of work or will sort of reduce
05:32 the crowding out effect in terms of bond issuances. So, I think a lot of factors which are structural
05:37 positive for banking as a whole and I think as it's a bank, our sense is that overall
05:45 things are going to get a lot more better valuation wise. I think within Kiro banks,
05:49 it's relatively attractive now. So, I think everything is in place for this stock to do
05:54 well. But like you said, we would not expect that price performance to sort of immediately
06:00 start. So, I think people will have to wait for some period of time before the number
06:05 sort of stabilizes.
06:06 Wait and watch on the fundamentals. On the technicals though, Rajesh, what are you picking
06:11 up? What indicators are you looking at? And also, what are the thresholds, key numbers
06:18 or key price points to watch out?
06:21 So, in the last three, four quarters, nothing has been delivered in terms of price behavior
06:30 of the stock. The stock is in a broadly consolidation range. Lower band for this consolidation is
06:37 at around 1450 and on the higher side, the major supply zone for the stock is at around
06:43 1600 kind of zone. Looking at the near term, short term setup, the stock is still showing
06:50 a weakness as the stock is trading below to all its short term, medium term moving averages.
06:56 So that is adding up the bearishness in the stock on the near term basis. If you look
07:02 at the very near term setup, like for trading perspective, the stock is now trading near
07:07 to its very critical support area of 1500. If at all the stock is below that level, then
07:13 possibly further follow up selling we can see in the stock and it may go down towards
07:18 1460, even 1420 level on the downside.
07:22 Looking at the derivative data front also, the major call writers are still aggressive
07:27 at 1540, 1560, even 1600 strike. So these are the major challenging levels for the stock
07:33 on the near term as well as on the short term basis. So major revival in terms of price
07:38 will come above 1600 mark only. Until the stock not crosses above 1600, it may remain
07:45 for consolidation for some more couple of months. This is the third, fourth consecutive
07:50 month where we are seeing lower high low formation. That is clearly showing that sustained selling
07:55 pressure is there in the stock prices.
07:57 So on the decline, one can yes, buy the stock towards 1450, 1420 zone. That is the area
08:04 where the good support area for the stock in the decline. Those who wants to buy only
08:10 on the breakout, then they should wait for the breakout above 1580 or 1600 zone. Then
08:16 we can see a short term rally in the stock. But till we are expecting looking at the behavior,
08:21 some more consolidation we can see for the next couple of months.
08:25 All right. Let's start taking the questions now. First up, we have a question from Chandrasekhar
08:32 and he's asking about Amararaja Energy. Now, the stock is in the red today, but has been
08:41 up about 10% in the last six months. He has 10 shares and he got an average price of 620
08:49 and he plans to accumulate. So what is the target price for the next 6 to 12 months?
08:53 So, Ankur, let's start with you first.
08:56 I think when you look at the traditional battery players, I think things are changing for them
09:02 because one, overall, the demand scenario for autos have been good. And I think more
09:09 than that, companies are now looking to sort of change their business streams as well.
09:14 What we like more is Exide Industries with a target price of about 330. Now, Exide has
09:21 already given a plan for 6 gigawatt kind of a capacity, about 6,000 crore kind of a capex.
09:27 And I think Amararaja also has announced a big capex of about, I think, closer to 10,000
09:34 odd crores spread over the next 10 years. Now, our sense is that these new energy verticals
09:42 or the lithium ion battery space has similar ROCs and similar margins compared to traditional
09:48 business segments. So one is, I think these companies are sort of changing for better
09:54 given the fact that the overall context is or the overall industry dynamics are changing.
10:00 And we haven't seen much of a price performance in both the stocks. What we like more is Exide,
10:07 but I think we are actively looking at even Amararaja because I think we haven't seen
10:11 much of a price performance. And if they're able to sort of deliver on these expected
10:15 lines or what they've been sort of stating, I think these stocks look good within the
10:21 auto-inseller space from a portfolio performance perspective.
10:24 All right. Let's take a technical check on this. So what are the cues from the charts
10:29 are giving?
10:30 Since last three, four weeks, the stock is consolidating at a very narrow price and the
10:36 stock is making support at around 630-620 zone, which is very important for near-term
10:42 setup. Though stock is in the recovery phase, if you look at the monthly chart, the stock
10:47 is moving up and since last three, four months, we have seen a significant recovery from the
10:52 recent low. Looking at the overall structure, yes, one can hold the position with stop-loss
10:56 of 620 and once the stock crosses above 665, then possibly we can see another upward target
11:02 towards 720-740 on the higher side. So one can hold on their position with 620 stop-loss.
11:08 Okay. Rajesh, take a look at Jamuna Auto because this is a counter that Netra wants to know
11:14 about. She's looking at the next six months as a holding period. She's already holding
11:21 this at a price of 110. And after we're done with the technical check, Pankaj, I'll come
11:26 to you on a view on Jamuna if we can get one. But Rajesh, what's it looking like on the
11:30 charts?
11:31 So overall structure is bullish. Stock is in uptrend, a series of high-top, lower-bottom
11:37 formation on the weekly chart, on the daily chart. Again, the stock has managed to give
11:42 a breakout of its falling trend line. So I think one can hold on the stock for further
11:48 more upward momentum as the stock is continuously holding above all. It's a short-term, medium-term
11:52 moving averages. Overall strength is there. The sector is also showing good traction.
11:58 So we expect that once the stock crosses above 130 zone, then possibly the next target in
12:04 the short term, we can see towards 145 to 150 also. So at this moment, we are holding
12:09 the position with stop-loss of 114 and remain invested for short to medium-term perspective.
12:16 Okay, Pankaj, any view on the fundamentals? Of course, this is short term, but I guess
12:20 if any investors are looking to hold for slightly longer than six months, what should they bear
12:25 in mind?
12:26 So I think, Alex, this has been a very good company consistently delivering high ROCs.
12:33 I think what they are guiding for is again, a good set of growth coming from non-auto
12:38 segment. So they are sort of diversifying the risk associated with the volatilities
12:44 what we've seen auto side. Now, previously we had a buy on the stock. The stock has sort
12:50 of already run up. I think I need to probably relook at it, whether there is some more juice
12:56 left or not. But I think overall, it's a good stock to be held in portfolio. I think potential
13:03 upside, I need to sort of come back. I really do not have a complete heads up on all the
13:09 numbers.
13:10 All right, Pankaj, another question is from Saurabh and he's asking about Utkarsh Small
13:15 Finance Bank. Now, their quarterly update last week was quite strong. The numbers were
13:22 quite good. Deposits grew about 19%, gross loan portfolio rose about 26%. What's your
13:28 view on Utkarsh Small Finance Bank?
13:32 So when you look at the entire BFSA space, everything looks attractive, be it a small
13:38 finance bank or a microfinance. Now, the challenge is that these segments go through good cycles
13:45 and bad cycles. And which is why when you're sort of playing some of these names, individual
13:51 names, I think that is where the challenge lies. I think I'll any day prefer a bank which
13:56 has got some element of this. So for example, IndusInd Bank has got good or a decent exposure
14:04 to microfinance. Obviously, it had its fair share of impact on the bank because the ROEs
14:09 had sort of come down to below 1 in a down cycle. But now it looks like things are looking
14:15 good for microfinance or a lot of other BFSA segment. So which is where if IndusInd Bank
14:23 is probably on course to sort of say deliver 2% kind of ROEs, which again opens up the
14:28 upside on that stock. So I think if you're playing that individual stock, be mindful
14:37 of the fact that you get up cycle and down cycle and that causes a good amount of volatility.
14:44 If you're looking for lesser amount of risk, then I think some of the banks which I mentioned
14:49 can be looked at.
14:52 Just a follow up to that, just to clarify, I believe that Saurabh was looking at the
14:58 entire small finance bank space. So would you say that your answer kind of covers that,
15:04 Pankaj?
15:05 So when you look at small finance bank, most of them are guiding for 25 to 30% plus kind
15:11 of a growth. Credit cost is not going to be a challenge for next 2-3 years. So this is
15:16 a good cycle which is sort of panning out. But like I said, you should be mindful of
15:21 the fact that you sort of exit before it hits a down cycle, otherwise you could end up losing
15:29 some of these gains. And if you're looking for a lot more stabler kind of a return, then
15:34 like I said, IndusInd Bank is sort of a good example to look at.
15:40 Interesting. Okay, shifting gears and talking about Finolex Industries, very different segment
15:46 to play in. But we got Mehak who's gotten at levels of 140. The stock price is currently
15:52 at 225 and it's had steadier returns over the last one year. The question, Pankaj, is
15:57 and I'll come to you Rajesh on the charts as well. But the question, Pankaj, on the
16:00 fundamentals is, should you hold on right now or should you book some profits?
16:06 So Alex, if you look at the entire sort of piping industry that has gone through fair
16:12 share amount of volatility because the PVC prices literally from 80 rupees a kg had
16:17 sort of jumped to about 160 rupees a kg. So one part of time, companies had made losses,
16:23 margins were substantially lower. Now things are sort of normalizing. I don't have a specific
16:29 answer for Finolex, but like the entire piping industry, largely because things are sort
16:35 of normalizing. When you look at real estate as a cycle, I think after 10 years, you are
16:39 seeing one of the best resales or overall volume growth plus the pricing has also been
16:45 on an uptrend despite the fact that your mortgage rates are at 9% higher. So our sense is that
16:52 the entire ancillary value chain of real estate, be it piping or be it other segments, should
16:57 benefit from this. The stock has done well, like say for example, even other companies
17:04 like say Supreme, when you sort of look at. So our sense is that overall, you will see
17:11 more of a sort of a normalized growth in terms of low team kind of volume growth plus some
17:17 bit of a pricing growth going forward. But I think best is yet to come. But given the
17:22 fact that some rally has already panned out, so probably in the near term, I may not expect
17:28 a similar price performance for most of the players. I don't have a specific answer for
17:33 that. Fair point. On the pricing front or on the price action front, perhaps we'll get
17:38 a view from Rajesh on what to do. What can you tell us on the charts? Should you book
17:43 some profits is the question.
17:45 Well, I think I'll hold the position because as the overall structure is looking on the
17:51 bullish side and if you look at the weekly as well as the monthly setup, stock is forming
17:56 a rounding bottom sort of formation. And the kind of accumulation activity we have seen
18:01 in the lower prices that clearly show that once we get the breakout above 250 to 55 zone,
18:08 then these stocks can scale up further towards 320 to 350 zone also. So overall structure
18:14 is looking bullish. I think one should hold on their investment position at the current
18:18 level also. Even in the decline also, 200 to 195 are the important level again to buy
18:25 and accumulate this stock. And overall long term structure is looking bullish. I think
18:29 we may see further more run up going forward in the stock. So one can buy and accumulate
18:34 the stock at the current price also.
18:36 All right. Now, taking our focus to the fertilizer space, Neetra has a question and she wants
18:42 to know if it's a good time to invest in the space. And particularly, she's asking about
18:46 Chambal Fertilizer and Pradeep Prostates. So Pankal, let's take it to you first. What
18:51 is your view on the fertilizer space at this point?
18:56 So Smriti, fertilizer as a space, we have not really sort of historically tried largely
19:02 because one, I think the volume growth is tepid and then you are sort of again exposing
19:08 yourself to the vagaries of monsoon. What we are sort of liking is some of the companies
19:16 like say Coromandel, which has got a fair share on the fertilizer side. Plus, I think
19:21 they are sort of evolving their model in terms of using drone to sort of spray fertilizers.
19:28 So I think I would sort of prefer some of these companies which are sort of looking
19:32 to change their business models. Otherwise, traditionally, it's a low growth industry
19:36 with a lot of volatility related to the input prices. So I haven't really looked at neither
19:43 I am sort of actively looking to sort of consider the space except for the rail which I mentioned.
19:51 A question on an Invit. This is Power Grid Infrastructure Investment Trust. Pankaj, any
19:57 view on this? We've got Kian who has a view on YouTube who's bought at levels of 120.
20:04 It is currently at 100 or thereabouts. Any view on the fundamentals?
20:10 So one, we don't have active tracking of the Invit, but structurally our sense is that
20:16 Invit also will tend to benefit if we get higher amount of foreign flows in the debt
20:22 market because that will sort of structurally lower the debt cost. And we all know that
20:28 a lot of asset creation is going to happen. So obviously, a lot of Invit can get adopted.
20:35 So structurally, it's a good space to be into, but I really do not have any specific to sort
20:40 of talk on any of the Invit. We have not been tracking actively any of the Invit.
20:45 All right. Next up, we have a question on CMS Info Systems. Now, just a second, I lost
20:54 the.
20:55 OK, it's fine. CMS Info System, we've got Saurabh who's got a question on this. And
21:02 let's first take a technical view. Rajesh, on the charts, how does this counter look?
21:07 So this is the fourth consecutive week where we are seeing that the stock is making higher
21:14 and higher formation that really shows some sustain buying is taking place in the near
21:19 term to short the basis. The stock is now comfortably holding above 20 day, 50 day moving
21:25 average. That is also adding up the bullishness on the near term sector. Stock is almost on
21:30 a verge of giving breakout to its multiple supply zone. So once the stock crosses above
21:35 485, 390 zone, then this breakout play will take this stock towards 440, 450 zone also
21:45 on the higher side. So I think if you already bought the stock, you can hold on the position
21:50 with a stop loss of 355.
21:54 OK. Pankaj, do you have a view on the fundamentals for CMS?
21:58 Sorry, Alex, I don't really track the stock.
22:02 OK, fair point. I've got another question. And again, I'm hoping that you have a view.
22:06 If not on this, then maybe you can advise on something as a question is on five star
22:10 business finance. And this is a question coming in from Upadhar Ramadu. He's one of our viewers.
22:17 He's asking whether you should invest in this. If not, would you have an alternate that you
22:22 can suggest, Pankaj?
22:26 I think on the small finance side, I've been liking more of tier 1 banks. And if in order
22:36 for banks, then I think PSA banks look a lot more structurally positive to us. We do not
22:43 track, like I said, a lot of these smaller banks. So won't be able to give a very concrete
22:50 view on any of these.
22:51 On price action then, Rajesh, do you have enough data to talk about five star business
22:57 finance?
22:58 So after correction, yes, our stock is recovering now. And now stock is trading almost near
23:06 to its 50 day moving average. Looking at the recovery in the recent past, we expect that
23:11 if the stock continues to hold above 1130, 725 zone, then possibly this recovery can
23:16 extend further. So pullback action is there. So I think 800 is the supply zone for the
23:21 stock. So if you want to trade from near term perspective, you can buy with stock loss of
23:27 725 upside target. This is 800 for 5 star.
23:32 All right. The next question is on Coal India. Pankaj, let's take a fundamental view on this.
23:38 Now I read a note on Nuvama that said that they expect the highest dividends in the next
23:44 year, in FY25. What do you think, what are the fundamental, what fundamental view do
23:51 you hold on Coal India?
23:52 So I think on Coal India, our sense is that a lot of these mining companies are doing
24:02 well and Coal India, the volume ramp up has been pretty good. And going forward, this
24:11 is one space within the PSU where the valuations are also sort of attractive with a good dividend
24:16 yield of 6-7 or 8%. Now our sense is that if the company is able to sort of diversify
24:22 into new mining areas, which what the government is looking to sort of offer, I think that
24:29 could provide further more trigger. Otherwise, we are not seeing coal demand being structurally
24:35 higher because there is hardly any new capacity being put up for thermal power plants. So
24:42 from that perspective, I think something more needs to happen for this stock to sort of
24:47 become attractive. Otherwise, dividend yield is good, the valuation is attractive and then
24:53 you have decent volume growth. At least now you have a believability that 1000 million
24:58 tons is what they can achieve going forward.
25:00 All right. Let's take a technical view as well on Ketan's question. Rajesh, what are
25:05 the charts showing on Coal India?
25:08 Very strong structure. We have seen a very strong breakout on the monthly chart. The
25:13 stock is now giving a breakout of multi-month supply zone. So now the stock is trading about
25:20 its 2019 swing highs. Looking at the price action in recent past, we expect further more
25:26 upside we can see. And I think one should hold their long position for trading perspective
25:31 as well as for the short-term investment perspective also. We are projecting target of around 345
25:36 to 350 in the continuation of the subtrend which we have seen since last couple of months.
25:43 One should hold their position with stop-loss of around 290.
25:48 The last question for the day, we've got Satish Mohan who's written in and asked for a view
25:52 on 10 networks he's purchased considering that, okay, I'm not getting what level he
25:59 bought it at, but the price is currently at around 53 or thereabouts. What's the view,
26:05 Pankaj, if you have one on the fundamentals?
26:09 So I think these DTH or broadband players really do not have much to look at in future
26:16 because now you have technology which is again, for example, when you look at geofiber, airfiber,
26:23 I think these are newer technologies. I think Airtel also has similar offering. And now
26:31 for you to be a panning player, you need deep pockets which both Jio and Bharti has got.
26:38 So I really do not see a very longish view for some of these names going forward. I think
26:43 from a portfolio perspective, Reliance or Bharti Airtel make a lot of sense because
26:50 we are already seeing convergence happening because now data is something which is going
26:55 to drive content. Plus, I think broadband also is expected to be largely driven by these
27:02 companies only. Otherwise, I think I really do not see a lot of scope for a future for
27:10 some of these companies. Though valuation wise, balance sheet wise, they might look
27:14 okay, but I think you can't really see 10 years, 15 years down the line what these companies
27:20 will look. So from that perspective, I think Reliance and Bharti look a lot better.
27:25 Okay, so switch to Bharti or Reliance is the advice on the fundamentals. Then why don't
27:31 we get a technical view as well to close this out Rajesh because he's bought at levels of
27:34 50 and he's got quite a large quantity, he's got 10,000 units. So at what level can you
27:41 look at it? It's more or less at his buy price.
27:45 So stock is underperforming stock and yes, some recovery is taking place. But if you
27:51 look at the long term timeframe, the stock is still in the bearish zone. So some recovery
27:57 is taking place. So he has already bought at 50 rupees. So I think he should now keep
28:02 his stop loss at around 48 rupees. We can see in the near term, but 60 is the major
28:10 hurdle on the higher side where he can either book profit or he can again review the again
28:16 stock at 60 rupees level where the major supply zone again on the near term basis.
28:21 All right. Well, gentlemen, we're completely out of time. But thank you so much, as always
28:27 for joining us and for answering all of the viewer questions that came in today. And to
28:32 you viewers, a lot of you are thanking us in the comment section. In fact, thank you
28:37 for tuning in. And it is our pleasure entirely to help you out with your stock related queries.
28:42 Remember, we are live through the week at the same time at 1130. So we'd love to have
28:47 you back on the show as well. That's all we have on this edition of Ask BQ. Thanks so
28:51 much for joining in. This is BQ Prime.
28:54 Bye.
29:02 Transcribed by https://otter.ai