An intelligent investor is always looking for stocks that would not be as volatile as the benchmark index but at the same time would offer returns better than most other stocks. HDFC is probably one such stock.
What drew our attention to the stock is the consistent manner in which it has been attracting the interest of FIIs. Believe it or not, but 40% of this 'Indian' entity is now owned by FIIs (the RBI has recently issued a circular stating that FIIs need prior approval to effect future purchases in the stock). Plotting the share price graph vis a vis the Sensex reveals an even more interesting picture.
HDFC is definitely an Indian blue chip, in terms of business that is. On the bourses however, the company's outstanding performance is only a recent phenomenon. Earlier, seasoned investors will remember well, the stock price of the company would hover at Rs 2,400 (Rs 100 face value) or thereabout levels. This despite the fact that private deals in the company's stock would be at a premium to market price. However, with investors like Standard Life having got permission to hike their stake to 10% in the company, the gap in valuations has all but disappeared. Among the other factors that changed in recent years (the management has always been well respected) was the government's outlook towards housing. The tax incentives boosted business prospects, and in turn growth.
However, with the RBI notice coming through, one can expect momentum investors to distance themselves from the stock (till the threshold is increased to 50% maybe!). Valuations notwithstanding, the fundamentals of the company will probably continue to improve in coming years.
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