This Value Stock A Long Time Market Beater Is Now Near 52-Week Lows

Markets have been exceedingly volatile through the week. On Monday, the indices dropped 3% and the next day it recovered 3%. It's best to buy high quality stocks, and not be too worried about the volatility of the markets.

HDFC: Stock offers value near 52 week lows

The stock of HDFC hit a 52-week low of Rs 2290 this week, as against the current market price of Rs 2364. That means it is now trading at almost 52-week lows.

The shares have dropped from levels of Rs 3000 plus and let us tell you one of the big reasons for the drop. The biggest problem for HDFC is that it is heavily owned by Foreign Portfolio Investors. Bond yields in the US have been surging and Foreign Portfolio investors have been selling Indian stocks.

Since they have large holdings in HDFC, the stock has been under intense selling pressure. Structurally, nothing has changed at HDFC to warrant such a fall.

Big ownership stake in stocks of HDFC Bank, HDFC Ergo, HDFC AMC, HDFC Life etc

Ownership of	Per centage ownership
HDFC Bank	21.02%
HDFC Life	47.82%
HDFC Mutual Fund	52.62%
HDFC Ergo	49.98%
HDFC Sales	100%
HDFC credila	100%
HDFC Property Fund	100%

The stake of HDFC in these companies itself could be worth in lakh crores.

HDFC: Good consistent performer

Over the last couple of decades, the stock of Housing Development Finance Corporation has been a market beater. In fact, the returns from the stock is much better than what the indices have generated. The company has loans outstanding of Rs 6,189.17 billion and over the last 5 years, the company has reported compounded annual net profits of 21%, which is certainly very good.

In the third quarter ending Dec 31, 2021, the company performed very well. The company saw growth in home loans in both, the affordable housing segment as well as in high income groups

Housing sector to see robust growth

India's housing sector is under penetrated and the government has been offering various schemes and incentives. There are tax incentives for home loan borrowers for home loans, which is likely to stay for many more years. There are also liquidity schemes and special refinance facilities for NonBanking Financial Companies - Housing Finance Companies. On the supply side there incentives to developers to build affordable housing. 'Infrastructure' status has also been accorded to affordable housing. There are also benefits like External Commercial Borrowings/Rupee Denominated Bonds Issued Overseas.

Valuations and view on HDFC and why to buy the stock

The shares of HDFC are currently trading at around Rs 2360. Recently, Sharekhan in its report estimated that its value of holdings in subsidiaries itself could be worth Rs 1660. This means that the core business is barely worth Rs 700 plus.

We believe that the stock of HDFC is certainly undervalued and once FPIs come back to buy into Indian stocks, the stock of India's largest mortgage company could go up.

Buy the stock of HDFC for decent returns in the medium to long term.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.