HDFC Bank’s 11 lakh crore question: Can it fix its margins

Week ahead

From the investor's mind

Explaining why a combined REIT and InvIT index fund isn't feasible, Radhika Gupta points out that a REIT is considered an equity instrument, while an InvIT is a hybrid. A fund combining both would therefore become a hybrid index fund. However, hybrid index funds are designed specifically for pure equity and debt components, making such a blended structure incompatible with their regulatory framework. Her clarification highlights the distinct classifications of these investment vehicles and the rules governing the types of assets permitted within different fund categories.

Word in the street

HDFC Bank Limited

Few stocks capture the market’s attention quite like HDFC Bank, especially after a year that saw its shares fall nearly 25 percent. Despite its massive 11,43,986 crore market capitalisation, investor discussions have been intensely focused on its fundamentals following the significant merger with HDFC Ltd. Conversations have revolved around the bank's declining net interest margins, weaker return on equity, and a lower CASA ratio. These discussions question whether the bank's valuation multiple should be lower going forward. Some have drawn comparisons to historical global bank mergers, though others argue the circumstances, like regulatory pressures and the preceding financial crisis in those cases, were entirely different.

Yesterday's big moves

“Buy right and sit tight.”

Raamdeo Agrawal