This signalled a change of guard on Dalal Street. Not long ago, stocks from HDFC Group used to rule the roost, with analysts and the investing community always gung-ho on these names. ICICI Group stocks have gone one up on them now.
In his portfolio, Wood allocated 7 per cent to
, 7 per cent to ICICI Prudential Life Insurance and 8 per cent to ICICI Lombard General Insurance. In comparison, he set aside just 7 per cent to HDFC, the only HDFC Group stock to feature in the portfolio.
Performance wise, ICICI Group stocks have outdone their peers at HDFC by a wide margin. For this calendar, shares of ICICI Group have returned some 42 per cent led by , while HDFC Group stocks have remained more or less flat.
The reasons for HDFC Group’s underperformance are not far to seek. The huge sizes of the firms may be one of them. Two flagships of the group — HDFC and
— are still growing, but the pace has slowed down.
Famous on the Street for clocking 20 per cent growth every quarter, both companies have failed to maintain the run rate in the recent quarters, partly due to large bases and because of a pandemic hit.
Moreover, regulatory actions have hit the conglomerate’s banking operations of late. RBI has blocked HDFC Bank from issuing any more credit cards as a punishment for having a digital infrastructure that is full of glitches.
Its competitors, including ICICI Bank, have made the most of the opportunity. RBI data shows ICICI Bank’s cardholder base grew by 6,72,911 in the March quarter, while HDFC Bank’s portfolio contracted by 3,22,999. In April, HDFC Bank’s new card issuances fell by 66,000. However, it still has the lion’s share in the credit card market.
Analysts have also trimmed their expectations from HDFC Group stocks while they see better opportunities in the peer group. A number of analysts project ICICI Bank to outperform HDFC Bank over the next one year.
A rotation is clearly visible within the financial services. Some of the erstwhile leaders of the banking sector have been relative underperformers in the rally seen over the last 6-8 months, as we have come out of very serious corporate credit cycle,” Rupen Rajguru, Head of Equity Investment & Strategy, Julius Baer, said in a recent interview to ETNow.
“Corporate books have also become relatively cleaner, so they are catching up. Some of the banks that have strong franchises on the liability side and digital side but had got significantly derated due to corporate issues are now reverting to mean,” he said.
On the insurance side, the ICICI twins have created a lot of buzz recently after a period of underperformance. “ICICI Pru Life had been a big underperformer in the last two quarters. After a strong revival in new premium growth as well as in Ulip sales, people are looking at it and it is getting better traction,” said Hemang Jani of Motilal Oswal.
It is not as if HDFC Group stocks have totally gone out of analysts’ radar. Most analysts and investors still rate them as some of the best-run companies in the country and see them as solid long-term bets. It is just that the opportunity to make money in them is comparatively weaker now.
