Category: Personal Finance

1. HDFC Bank:

Axis Securities suggest buying the stock of HDFC Bank for a target price of Rs. 1770 per share, i.e. an upside of over 10 percent from the last traded price of Rs. 1606.

Highlights of the stock

• Strong Advances growth: In Q2FY22, Advances growth remained strong at 15.4%/4.4% YoY/QoQ to Rs 11,985 Bn, better than the industry average of ~6%. In the previous quarter, Advances were up 14.4%/1.3% YoY/QoQ.

• Loan mix: Retail book witnessed an improvement of 13%/6% YoY/QoQ, led by traction in Cards, Housing Loans, and Vehicle Finance. In Q1FY22, retail loans had de-grown 1% QoQ. Commercial & Rural banking continued to do well, growing at 28%/8% YoY/QoQ

(25%/4% YoY/QoQ growth in Q1FY22). Wholesale loans moderated with a growth of 6% YoY and 0.5% QoQ (10.5%/1.5% YoY/QoQ growth in Q1FY22).

• Healthy Deposit growth: HDFCB continues to see healthy traction in deposits, as will be visible in most large banks. Deposits were up 14% YoY and 5% QoQ to Rs 14,060 Bn. Retail deposits grew by ~17.5%/4% YoY/QoQ. Wholesale deposits grew by ~2%/5.5%

YoY/QoQ.

• Strong CASA: CASA traction remains strong, up 29% YoY and 8% QoQ, resulting in a sharp improvement in CASA ratio to 47% from 41.6% YoY.

On the growth front, the bank has managed to sustain its performance even amid Covid related business disruption. The bank also gained market share as it performed better than the overall industry growth.

Moreover, the brokerage expects growth in the credit card portfolio to improve with the lifting of the credit card embargo in Aug ’21. The bank has also inked strategic agreement with payments solution company Paytm for offering financial solutions.

“While there are still niggling issues on account of the RBI cap on fresh digital launches and recent whistleblower allegations on fees, we expect these

will have to be aptly taken care of.

We believe HDFC Bank remains one of the resilient stocks in the sector. We maintain a BUY on the stock with a target price of Rs 1770/share (SOTP basis core book at 3.6x FY23Eand Rs 48 Subsidiary Value)”, says the brokerage firm.

2. Canara Bank:

ICICI Direct has suggested to buy the stock of Canara Bank in the price range of Rs. 163-166 for a target price of Rs. 195. The scrip is a buy for 3 months and the stop loss suggested is Rs. 148. Note from the current market price of Rs. 182, the targets given imply an upside of

Rationale for the buy on Canara Bank

Canara Bank has failed to perform in line with the markets and remained under pressure despite continued buying in the markets. However, the stock is exhibiting significant accumulation in its price distribution pattern. The daily returns are largely distributed from 0% to 2%. Furthermore, the right tail is almost similar to the left tail but a bit longer suggesting positive bias prevailing in the stock.

From a delivery perspective, despite range bound move seen in the last couple of weeks and underperformance vis-à-vis index, delivery activity is clearly visible. It seems like there is ongoing accumulation in the stock at lower levels. The Z score has also hovering towards positive territory suggesting buyers accumulating the stock.

The 30 day volatility moved higher than its 60 day volatility due to recent up move being seen in the stock. However, we believe it will subside in the days to come and ongoing momentum may continue in the stock.

3. Federal Bank:

Axis Securities suggests a buy on Federal Bank for a target price of Rs. 100 i.e. an upside of 16 percent from the stock’s last traded price of Rs. 86.15.

Key highlights about Federal Bank

• Gross Advances delivers healthy growth: Gross Advances grew 9.7%/3.4% YoY/QoQ to Rs 1,373 Bn compared to a growth of 7.6% YoY and a de-growth of 1.6% QoQ in Q1FY22. We expect the loan growth to be driven largely by retail, gold loans, and government-

guaranteed schemes.

• Good traction in deposits: FB continues to witness good traction in deposits with growth of 9.7%/1.5% YoY/QoQ to Rs 1,720 Bn. This was led largely by CASA growth of 17.8/5.5% YoY/QoQ, improving it to 36.2% from 33.7%/34.8% YoY/QoQ.

• Healthy growth in deposits: Customer deposits were up 11/2.5% YoY/QoQ to Rs 1,687 Bn. Inter-bank deposits de-grew 54%/44% YoY/QoQ to Rs 13 Bn. Certificate of deposits (CoD) declined 20.5% QoQ and was up 4.9% YoY to Rs 19 Bn.

• Liquidity Coverage Ratio remains high: Liquidity Coverage Ratio (LCR) remains high at 225.9% vs. 266.3%/215.9% as of YoY/QoQ.

• Better-than-industry average growth: Overall business growth at 9.7% YoY was better-than-industry average growth. Sequentially, business growth of 2.4% was better than the 1.7% decline in Q1FY22 witnessed amidst lockdowns.

• Healthy CDR: Credit Deposit Ratio (CDR) remained healthy at 79.8% vs. 79.9%/78.4% YoY/QoQ

The brokerage house continues to believe that Federal Bank is well-placed on account of its improved business mix, strong liability franchise, adequate capitalisation, and better-rated borrowers. The bank has invested and revamped its high-margin product portfolio such as Business Banking and select Retail lending segments (CVs, MFI, and Credit Cards). New focus segments will gradually boost margin improvement which will lead to sustainable high ROAs.

“We maintain a BUY rating on the stock in the backdrop of attractive valuations and value it at 1.1x FY23E ABV to arrive at a target price of Rs 100”, adds the brokerage house.

Disclaimer:

The investment ideas are picked from the brokerage report of ICICI Direct and Axis Securities. Investors should note that investing in stocks is risky and neither the author, nor Greynium Information Technologies Pvt Ltd, nor the brokerage would be responsible for losses based on a decision from the above article.

The Atal Pension Yojana (APY) was launched by the union government in 2015 for offering a universal social security system for Indians. The scheme, administered by the Pension Fund Regulatory and Development Authority (PFRDA) initially aimed to help especially the poor, the under-privileged section, and the workers in the unorganized sector. A subscriber can join the APY scheme through a public or private sector bank branch, or a post office. Both online and offline application modes are available for the scheme. The union government will have a 50% additional contribution of the total contribution by the subscriber or a Rs. 1000 per annum, whichever is lower.

One can contribute to an APY account monthly/quarterly/half-yearly basis. Change in the frequency of contribution, like from quarterly to a monthly contribution, etc. can be done after submission of a written request by the APY subscriber to the APY service provider branch. An APY subscriber can also modify their pension amount once in an FY.

Benefits

According to the government, a subscriber will receive a guaranteed minimum monthly pension of Rs. 1000 or Rs. 2000 or Rs. 3000 or Rs. 4000 or Rs. 5000 at the age of his/her 60 years. The monthly pension will be given to the subscriber; in case of his/her death, to the spouse. After their death, the pension corpus, as accumulated at age 60 of the subscriber, would be returned to the nominee of the subscriber. a government document mentions, “If the accumulated corpus based on contributions earns a lower than estimated return on investment and is inadequate to provide the minimum guaranteed pension, the Central Government would fund such inadequacy. Alternatively, if the returns on investment are higher, the subscribers would get enhanced pensionary benefits.”

Approximate contribution to receive the benefit of Rs. 1000 pension monthly

Source: HDFC bank

Who can apply for the Atal Pension Yojana (APY)?

A person, who is not a beneficiary of any social security scheme and is not an income taxpayer will be eligible for the scheme. To apply for the APY scheme the person needs to be an Indian citizen aged between 18-40 years. It is open to all bank account holders, but the contributions differ based on the pension amount chosen. One must provide nomination and spouse details in the APY account. If the subscriber faces a premature death (death before 60 years of age), the subscriber’s spouse will be able to continue the contribution to the scheme under the same APY account. The spouse can contribute for the remaining vesting period, till the original subscriber would have attained the age of 60 years.

An APY mobile application is also available for the APY users to view the contributions, transaction statement, and e-Permanent Retirement Account Number (e-PRAN) card.

For closure of an APY account, a duly filled ‘Account Closure Form (Voluntary Exit) form’ and other related documents will have submitted to the concerned APY service provider branch, also one can find the form is available at – www.npscra.nsdl.co.in.