HDFC drops on concerns of slowdown in home loan growth

Housing finance major HDFC declined 4.29% to Rs 2,168.90 at 15:41 IST on BSE on concerns higher interest rates will slow down demand for housing loans.

Meanwhile, the BSE Sensex was up 113.49 points, or 0.8%, to 14,220.07.

On BSE, 1.84 lakh shares were traded in the counter. The scrip had an average daily volume of 2.03 lakh shares in the past one quarter.

The stock hit a high of Rs 2220 and a low of Rs 2,136 so far during the day. The stock had a 52-week high of Rs 3,257 on 9 January 2008 and a 52 week low of 1,788 on 17 August 2007.

Shares of HDFC, India's largest dedicated housing finance firm by operating income, had outperformed the market over the past one month till 24 June 2008, declining 11.93% compared to the Sensex's decline of 13.71%. It had however underperformed the market in the past one quarter, declining 14.82% compared to Sensex's decline of 12.31%.

The company has an equity capital of Rs 284.21 crore. Face value per share is Rs 10.

The current price of Rs 2,168.90 discounts its Q4 March 2008 annualised EPS of Rs 108.17, by a PE multiple of 20.05.

Interest rates are set to go up further with the Reserve Bank of India on Tuesday, 24 June 2008, hiking both repo rates and cash reserve ratio (CRR) by 50 basis points each. While the repo rate has been hiked with immediate effect to 8.50 %, the CRR will be hiked in two tranches, to 8.5% on 5 July 2008, and to 8.75% on 19 July 2008.

The double-stroke anti-inflationary measures are expected to tighten the liquidity in the system, as the CRR hike would suck out around Rs 16,000 crore. CRR is the proportion of deposits mobilised by banks and parked with the RBI for statutory requirement. Banks do not earn any interest on the cash reserves. Repo rate is the rate at which RBI lends money to banks.

HDFC's net profit rose 39.6% to Rs 768.12 crore on 45.5% rise in operating income to Rs 2,522.28 crore in Q4 March 2008 over Q4 March 2007.

The company provides housing loans to individuals, corporates and developers