HDFC Bank Shares Could Break A Three-Year Resistance

However, with the stock back at its years-long resistance level, continued momentum could suggest a breakout, according to analysts.

"We are closely monitoring HDFC Bank as the stock appears to be on the verge of breaking out of the trading range that has been in place since the beginning of 2021," Laurence Balanco, technical analyst at CLSA, said in a June 26 note.

A close above the Rs 1,717–Rs 1,734-per-share resistance would mark a major bullish event, ending a period of over two years of ranging price action. This breakout would suggest an upside target of Rs 2,373 apiece, representing a potential increase of 35–38%, the note said.

This will be the first quarterly earning's report that will be comparable against the year-ago figures, due to a mega-merger between Housing Development Finance Corp. and HDFC Bank, which was completed last July.

Over the three-year period of underperformance, the stock oscillated between positive and negative earnings surprises, as well as major announcements which kept it range-bound between Rs 1,270 apiece and Rs 1,757 per share.

The stock hit a high of Rs 1,725 per share right before second quarter earnings for fiscal 2022 were announced. After that, it fell 22% till March 2022.

The shares subsequently rose till April 4, 2022, nine days before the announcement of Q4 results for fiscal 2022.

On the day, they hit a high of Rs 1,722, and ended the day 10% higher on the news of a proposed merger with HDFC Ltd. What followed, was a 20% decline over nine sessions.

A promising set of results in the fourth quarter of fiscal 2023, followed by the merger coming into effect by the first quarter of fiscal 2024, kept the stock range bound, with the highest point reaching Rs 1,757.5 per share on July 3, 2023.

Three weeks ahead of the third-quarter results for fiscal 2024, the shares breached the Rs 1,700 level, yet an earnings disappointment saw them tank once again, this time to Rs 1,380 apiece—their lowest level in over a year.

Private banks have been outshined by their government-owned peers for the majority of the last three years. However, they managed to overturn this trend over the past month.

Nifty Private Bank rose 9% over the last month, while the Nifty PSU Bank has moderated by a marginal decline of 0.7%.

Amid this reversal of trend, shares of HDFC Bank Ltd. have grown by 12% in June 2024, and nearly 20% since its low on May 13, 2024.