HDFC AMC shares jump 13% to trade near one-year high levels; here's why

Shares of HDFC Asset Management Company Ltd rose sharply in Friday's deals. The stock today surged 12.53 per cent to hit a day high of Rs 2,307.15 over its previous close of Rs 2,050.20. Housing Development Finance Corp and the group's other stocks have been in the buzz this week after it was announced that HDFC and HDFC Bank are working towards completing the merger of the two financial behemoths by July 1 and may set July 13 as the record date for swapping shares.

HDFC AMC has climbed 17.67 per cent in the past one month and 4.72 per cent on a year-to-date (YTD) basis. Around 3.33 lakh shares changed hands today on BSE, which was lower than the two-week average volume of 22.36 lakh shares. Turnover on the counter stood at Rs 75.38 crore, commanding a market capitalisation (m-cap) of Rs 48,919.73 crore.

At today's high price of Rs 2,307.15, the stock traded 44.63 per cent higher from its 52-week low of Rs 1,595.25, hit on March 20, 2023. Yet, the counter has slipped just 0.30 per cent from its one-year high of Rs 2,314, a level seen on December 20 last year.

Today's sharp upward move, an analyst said, can be related to the outcome of recent Sebi (Securities and Exchange Board of India) board meeting, in which the proposed reduction in expense ratio was deferred.

"The surge can be attributed to the recent Sebi board meeting where the suggested reduction in expense ratio was postponed. As a result, there is a growing interest in purchasing AMC stocks, as the market anticipates that the profitability of these asset management companies will likely stay steady in the near future," said Ravi Singh, Vice-President and Head of Research at Share India.

Earlier this month, it was reported that UK asset manager Abrdn Investment (formerly Standard Life) sold shares in the company worth up to Rs 4,126 crore (around 10.20 per cent). The sale was likely done at a price range of Rs 1,800 to Rs 1,892.45 per share through block deals, news agency Reuters reported, citing a news channel.

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In March 2023 quarter (Q4 FY23), the company's standalone net profit jumped 10 per cent to Rs 376 crore as against Rs 343 crore in the same period last year (Q4 FY22). Also, it declared a dividend of Rs 48 per equity share for FY23. The stock went ex-dividend on June 9. The dividend would be paid on July 26.

On technical setup, the counter's 14-day relative strength index (RSI) came at 73. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-earnings (P/E) ratio of 31.40. It has a price-to-book (P/B) value of 3.81.

The scrip has a one-year beta of 1.12, indicating high volatility. Support on the counter could be seen at Rs 2,150.

"The stock looks bullish, which indicates some correction in near-term. If it sustains and consolidates at current level, then it might touch Rs 2,500," said Share India's Singh.

"HDFC AMC is bullish but also overbought on the daily charts with next resistance at Rs 2,430. Trend will turn bearish only if the daily support of Rs 2,150 is breached," said AR Ramachandran from Tips2trades.

"Mid-term to long-term investors can take an entry at a market price of Rs 2,270 with an averaging view, in case required, up to Rs 2,000. Target expectancy could be be between Rs 2,400 and Rs 3,000. Keep a strict stop loss placed at Rs 1,860," said VLA Ambala, Research Analyst at Stock Market Today.

Shares of HDFC and HDFC Bank were last seen trading 0.83 per cent and 0.93 per cent higher, respectively, today. On the other hand, HDFC Life Insurance Company slipped 0.92 per cent.

Meanwhile, Indian equity benchmarks traded higher in late deals today to touch their fresh all-time high levels due to improved sentiment following robust economic data from the US, which eased fears of a slowdown. The domestic indices were up led by gains in technology, banks, financials and automobile stocks.

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