HDFC Bank vs Axis Bank: Which bank stock should you buy for long-term? Here’s a 5-point analysis

  • HDFC Bank vs Axis Bank: Domestic brokerage firm JM Financials is bullish on HDFC Bank for long-term on the basis of quarterly rebalancing and average returns

Nikita Prasad
First Published14 Jun 2024, 07:53 PM IST
HDFC Bank vs Axis Bank: JM Financials is bullish on HDFC Bank for long-term returns
HDFC Bank vs Axis Bank: JM Financials is bullish on HDFC Bank for long-term returns

HDFC Bank vs Axis Bank: Leading private lenders HDFC Bank and Axis Bank received bullish-to-neutral ratings from domestic brokerage firms after declaring their January-March quarter results for fiscal 2023-24 (Q4FY24). According to BSE data, HDFC Bank currently commands the top spot as India's largest banking major by market cap, followed by Axis Bank at the fourth rank.

The Nifty Bank index settled 0.31 per cent higher at 50,002 on Friday, June 14 after the benchmark Nifty 50 index touched a record high of 23,481 in the last 30 minutes of today's trading session. Sensex and Nifty 50 settled higher despite a flat and sluggish opening, following buying interest in the market heavyweights HDFC Bank, among others.

Also Read: M&M outshines Tata Motors to become India's second-largest auto major; shares hit fresh 52-week high

The 30-share BSE Sensex ended higher by 181.87 points or 0.24 per cent at 76,992.77 level while the Nifty 50 closed at 23,465.60 level, up 66.70 points or 0.29 per cent. On a weekly basis, the Nifty advanced 175.45 points or 0.75 per cent. The frontline indices were driven by auto and consumer durable sectors.

Bank Nifty index has been in consolidation for the past five sessions and was unable to surpass the 50,000 mark, according to experts. ‘’The index needs to decisively surpass the 50,200 mark to confirm an upside breakout towards the 51,000 level. The lower-end support is placed at the 49,500-49,400 zone, and a break below this will open gates for further downside towards 49,000,'' said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.

HDFC Bank vs Axis Bank: Share Price Trend

On Friday, shares of HDFC Bank opened at 1,582.05 and gained around two per cent to hit an intra day high of 1,599.70, before settling 1.05 per cent higher at 1,597.45 apiece on the BSE. In the last one month, HDFC Bank has given 9.73 per cent returns to investors, however, the last one year returns have been negative to the tune of 0.41 per cent.

Axis Bank opened at 1,176.25 and hit an intra day high of 1184.25, before settling 0.65 per cent higher at 1,182 apiece on the BSE. In the last one year, Axis Bank has given 19.8 per cent returns, against Nifty 50's 25.38 per cent and Sensex annual returns of 21.93 per cent, according to Trendlyne data.
 

HDFC Bank vs Axis Bank: Which bank stock should you buy?

•Domestic brokerage firm JM Financials is bullish on HDFC Bank as expects it to outperform Axis Bank on the basis of quarterly rebalancing and average returns. The brokerage said that in the last one year, HDFC Bank has declined by around 1.3 per cent while Axis Bank has surged up by around 22.2 per cent, resulting into a negative normalised return spread of around 23.5 per cent.

•Earlier, the pair has shown convergence at the spread of around -26 per cent during the period February-March, 2024. In the current instance too, it made a low at -27 per cent and has started moving up. On a one-year data window, the normalized return spread is trading at 1.3 standard deviation below the mean levels of -10.5 per cent. It is currently at its 10.4 percentiles.

Also Read: Axis Bank Q4 Results: Net profit at 7,130 crore, NII rises 11.5% YoY, dividend declared; 5 key highlights

•‘’We expect the weight of HDFC Bank to get doubled in the upcoming MSCI quarterly rebalancing, announcement due in the month of August. In the previous quarter, the stock missed the chance of weight doubling by a whisker as the Flls holding stood at 55.54 per cent as against the required 55.5 per cent,'' said JM Financials.

•Based on the monthly mutual fund holding data, Dlls have bought ~$1.2 billion cumulatively in April and May, which is ~0.8 per cent of the market cap. ‘’Assuming that a part of it would have changed hands from Flls to Dlls, we believe there is a higher probability of the Flls holding to go below the required 55.5 per cent,'' said the brokerage.

•Any such expected reduction in Flls holding is likely to increase the weight by ~3.8 per cent in the MSCI, resulting into a buy flow of ~$2.3 billion, which is almost six times of the average volumes. On a year-to-date (YTD) basis, HDFC Bank has moved down by nearly seven per cent while Axis Bank has moved up by eight per cent.

Also Read: Nifty 50 likely to hit 25,816 in 12 months; PL overweight on banks, auto, telecom: ITC, BEML among high conviction picks

Q4 Results: HDFC Bank vs Axis Bank

HDFC Bank reported a 0.9 per cent sequential increase in net profit, totaling 16,511.9 crore in the fourth quarter of FY24. The year-on-year (YoY) numbers were not comparable due to the bank's merger with Housing Development Finance Corporation (HDFC) on July 1, 2023.

Despite the rise in provisions, the bank's net interest income (NII) grew by 2.1 per cent over the previous quarter, coming in at 29,076.9 crore. Asset quality exhibited marginal changes, with gross non-performing assets (NPA) decreasing slightly to 1.24 per cent compared to 1.26 per cent in the previous quarter.

Similarly, net NPA increased marginally to 0.33 per cent compared to 0.31 per cent in the previous quarter. The gross NPA amounted to 31,173.3 crore, while net NPA stood at 8,091.7 crore in the March quarter of FY24. 

Axis Bank reported a net profit of 7,130 crore in the March quarter, compared to a loss of 5,728.4 crore in the corresponding period last year. The private sector lender's NII - the difference between interest earned and paid-rose 11.5 per cent YoY to 13,089 crore, compared to 11,742 crore in the year-ago period.

As of March 31, 2024, Axis Bank’s reported gross non performing assets (NPA) and net NPA levels were 1.43 per cent and 0.31 per cent respectively as against 1.58 per cent and 0.36 per cent as on December 31, 2023. Recoveries from written off accounts for the quarter was 919 crore.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.

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News in Numbers

Numbers that help you understand news better
₹295 Cr

$23 B

$65 M

3.36%

$65.47 B

$2.5 M

₹80 Cr

1.4%

₹773 Cr

₹2,705 Cr

₹1 Cr

₹14,370 Cr

₹5.74 T

First Published:14 Jun 2024, 07:53 PM IST
HomeMarketsStock MarketsHDFC Bank vs Axis Bank: Which bank stock should you buy for long-term? Here’s a 5-point analysis

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