HDFC Bank Shares Surge 9%. Should You Buy, Hold Or Sell?

HDFC Bank shares surged as much as 9 per cent after Reserve Bank of India removed restrictions placed on foreign institutional investors on purchase of shares of the private lender. RBI in a notification on Thursday said "the aggregate foreign shareholding through American Depository Receipts (ADR)/Global Depository Receipts (GDR)/ Foreign institutional Investors (FIIs)/Foreign Portfolio Investors (FPIs)/ Foreign Direct Investment (FDI)/Non-Resident Indians (NRIs)/ Persons of Indian Origin (PIOs) in M/s HDFC Bank Ltd. have gone below the prescribed limit stipulated under the extant FDI Policy. Hence the restrictions placed on the purchase of shares of the above company are withdrawn with immediate effect."

Foreign ownership in private banks is restricted to 74 per cent, a limit which is periodically reviewed by the Reserve Bank. Traders attributed the surge in HDFC Bank share prices to the scramble from foreign institutional investors to buy the stock.

However, HDFC Bank shares ended off highs, up 3.5 per cent,  after RBI again put restrictions on FII buying as their holding crossed the overall limit of 74 per cent of its paid-up capital.

Analysts remain positive on HDFC Bank shares despite today's upmove. Long-term investors can continue to hold HDFC Bank shares, says Siddharth Purohit, senior equity research analyst at Angel Broking. HDFC Bank is one of the best Indian banks in terms of asset quality and growth, he said, adding that further re-rating of the stock would depend on the growth momentum. 

Mayuresh Joshi, fund manager at Angel Broking, says HDFC Bank is one of the best bets to play on the India growth story. The credit growth will pick up and HDFC Bank will benefit from it, he added. 

Gaurav Bissa, derivatives analyst at LKP Securities, said HDFC Bank shares are likely to see pressure at higher levels as some domestic investors could be rushing to sell on the rally. Short-term investors could book some profits and re-enter the stock at lower levels, he said.